Telematics systems are typically touted for the ways they can help small businesses save on fuel costs, but some fleet operators are now using the software to reduce their commercial auto insurance as well. Not all insurance companies offer telematics programs to fleets — which can tell fleet managers and insurance companies how safe drivers are on the road — but for those that do, the savings can be significant.

The “Onboard Advisor” program from Liberty Mutual Agency Corp. (LMAC) offers a first-year discount of 15 percent for new members. Continued discounts, however, depend on the customer’s “safety score” based on aggregate fleet data.

“Beyond the first year, the discount varies depending on how safely your fleet operates,” says Chris Carver, Onboard Advisor’s program manager.

According to Carver, business owners must keep in mind that they can achieve insurance savings through a telematics program only if they use the technology to develop safer drivers. For instance, if a business identifies drivers who often travel over the speed limit but doesn’t use that information for safety training, then the telematics insurance discount might be reduced if your drivers’ risky behaviors continue.

How a Telematics Insurance Plan Works
Besides LMAC, which calls its union of insurance and telematics “Safety-Driven Insurance,” other plans are available from companies including Travelers, Zurich and The Hartford, which offers the “FleetAhead” program. The selection of providers offers a range of potential discounts.

First, you must install a telematics system to track your fleet. For most of the programs listed above, the software isn’t required to be installed on all fleet vehicles. For the Onboard Advisor program, for example, telematics must be installed on at least two-thirds of the vehicles.

The same is true for Travelers. In order to qualify for a discount, which goes up to 15 percent, a business must show it has telematics devices in a “sufficient” number of fleet vehicles. A business also has to show that it is giving safety feedback to employees on at least a quarterly basis.

Eagle Medical Service, a Tennessee-based ambulatory company, has installed the NexTraq telematics system on 26 of its 32 vehicles. Lawrence Riedel, operations manager of Eagle Medical, says the company originally installed the system back in late April for the purpose of dispatching and fuel maintenance. “The insurance (savings) was a bonus that we found out about a couple months after we got the system up and running,” he says.

By the end of 2011, Riedel estimates his company will save $20,000 to $30,000 on his policy through Empire Insurance. Riedel notes that other factors, such as accident rate, are driving those savings as well.

The real savings, however, are generated by safer drivers. Onboard Advisor, which is available in 23 states, allows savings of up to 40 percent as your fleet improves its safety score. “There’s a real incentive for (small businesses) to continue to try to work on their safety score and use those telematics to the maximum extent,” Carver says.

Participating LMAC companies will offer Onboard Advisor at no charge to any small- to medium-sized company they would traditionally insure. It’s also available to companies not insured through a participating LMAC company.

According to Carver, there is no size limit for vehicles to qualify for the program. Onboard Advisor’s typical customer has a 10- to 100-vehicle fleet, and many are in the service or delivery industries.[PAGEBREAK]

What Information Is Gathered?
The FleetAhead program from The Hartford and LMAC’s Onboard Advisor both measure speeding over the posted limit, excessive acceleration, aggressive braking, cornering, lane changing, and at-risk behavior relative to surrounding traffic.

For Riedel at Eagle Medical it’s mostly about speeding, for which he gets immediate notifications through NexTraq to tell a driver to slow down.

In addition to the safety score, the Onboard Advisor program also checks how the company ranks on fuel use, according to Carver, “because — no big surprise — safe driving equates to fuel-efficient driving.” The fuel score evaluates idling information and sudden starts and stops.

The Onboard Advisor program gathers total fleet information, while telematics applications provide individual driver detail, Carver says, adding that the process gives fleet managers a chance to talk with individual employees about any unsafe practices they’ve observed from the telematics data. He recommends that clients review the telematics info every 30–45 days and to take the information to company drivers.

Like regular insurance plans, the policies are reviewed annually. Riedel says Empire has not requested an audit, “but if they want to, we’d be more than happy to show them.” Empire will review the data after a year, and the rates could then change. The same is true for Onboard Advisor, according to Carver.

Each insurance company has its own list of approved telematics service providers (TSPs), and each recommends that businesses speak with an insurance representative first to see if their TSP qualifies. Zurich Fleet Intelligence (ZRI), for example, lists five usable companies, whereas the Onboard Advisor program requires that each telematics system has “accelerometer” capabilities, such as Geotab, Teletrac or Telenav.

Making ‘Safety-driven Insurance’ More Accessible
According to Robin Harbage of Towers Watson, a New York-based human resources, investment and risk management consulting firm, 24 percent of commercial insurers are implementing insurance telematics programs, with another 7 percent exploring the option.

In harnessing more telematics companies into these deals, TSPs and a joint organization representing the industry say the efforts have largely been on the side of TSPs.

Telematics safety system provider Inthinc, for example, is currently pushing forward on an insurance partnership, according to Todd Follmer, the company’s CEO. He says his company’s software is able to monitor behaviors such as seat belt wearing, hard stops and turns, large bumps and acceleration — making it an ideal TSP for insurance companies.

“We (TSPs) are all on the same team in trying to build this momentum to connect insurance companies with this data,” Follmer says. “It’s just a matter of educating the insurance companies so that they feel confident in what telematics does.” Only about 10 percent of small fleets currently utilize telematics, according to data from Telogis, another TSP.

Telematics Update, a resource for TSPs and mobile and web industries that organizes events, agrees with Follmer. Gareth Ragg, the U.S. conference director of Telematics Update, says there are a lot of questions remaining before insurance companies grow or start telematics plans.

“There’s an issue of standards,” Ragg says, adding that some insurance companies worry about adding new sectors to the company just for a telematics insurance program. “I don’t think we’ve found our end point yet,” Ragg says, but he seems hopeful that TSPs and insurance companies will continue to create synergy in order to offer potential discounts to fleet clients.