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Telematics Drives Big Savings on Commercial Auto Insurance

Small fleets are cutting costs by supplying their insurance companies with driving data gathered through telematics. Some have enjoyed savings of 15 percent or more. Are you asking for your discount?

November 2011, by Joanne Tucker - Also by this author

Eagle Medical, which estimates a telematics insurance savings of $20,000-$30,000 this year, has 32 vehicles ranging from Ford F-350s (pictured) to six executive vehicles.
Eagle Medical, which estimates a telematics insurance savings of $20,000-$30,000 this year, has 32 vehicles ranging from Ford F-350s (pictured) to six executive vehicles.

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.

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