Some larger motor fleets are adopting telematics-based insurance offerings in response to rising premiums and stricter safety regulations. Uptake is especially strong, according to some brokers, within the resources sector where operational risks and compliance demands are high. Motor industry stakeholders, including insurers, say brokers can play an important role in broadening uptake by educating fleet operators and helping overcome obstacles that can include privacy concerns and cost of implementation.
Telematics has made some strong inroads in the resources sector, says Peter Barron (pictured left), client director for Lockton, who is based in Perth – a headquarters for Australia’s natural resources industries. He believes, “it’s [telematics] a necessity for any decent-sized fleet, especially anyone dealing in the resources industry.”
Motor fleets made up of prime movers – heavy-duty trucks or tractor units dedicated to serving the transport requirements of resources companies – are increasingly valuing telematics-based insurance solutions. This technology is helping firms and their insurers bring costs down by reducing the number of accidents and by providing actionable data to prevent their future occurrence. Barron notes that video footage monitoring driver behaviour is particularly useful for supporting fatigue management accident prevention programs. By helping to show how accidents are occurring, telematics is being used to prevent their occurrence and reduce the number of costly third-party actions against firms. “That also helps insurers with recoveries,” he said, adding, “If you've got a fleet of 10 or 20 prime movers or more, I think it's a necessity these days.”
Telematics data is also helping firms running these fleets to demonstrate a good safety record and win contracts. Barron pointed out that telematics platforms are allowing these firms to deliver very sophisticated reports on driver behaviours and accidents. “Depending on the contracts that these firms are going for or tendering, their customers, especially in mining, will want to know what their safety records are like, especially with workers’ comp costs,” he said. “I think it’s become critical to them for growing their business.”
Interest in telematics is not limited to the resources sector. Other brokers report strong interest from medium-to-large motor fleet businesses, including logistics, transport and construction companies. Cynthia Yap (pictured right), managing director of Dynamic Insurance Services, a network of brokers, observed: “In response to rising premiums and excesses, some clients see the value in this technology. Especially where vehicle downtime, or high claims, can hurt profits.”
However, Yap identifies three key challenges that can stand in the way of a motor fleet firm adopting telematics.
First, privacy concerns: some drivers feel uncomfortable about being tracked by telematics technology, even when they know the data is used for safety and operational purposes. Other industry stakeholders echo that this as a major issue. Tanwir Dadarkar, director of Drivetec Solutions, says many drivers are concerned the technology will be a management tool to monitor them and pressure them to work quickly by comparing start and finish times. Dadarkar believes brokers can play an important role overcoming this obstacle by addressing these Big Brother concerns during their first conversations with a fleet company. “It’s about culture and the leadership team and how do drivers feel?” he said. “Do they trust the leadership that the data will be used for coaching, improvement and, actual safety?”
Second, there’s the cost of implementing telematics. Installation costs vary significantly; each vehicle typically requires a telematics device that can run between $50 and $300 per unit, depending on whether their features include GPS tracking, video and advanced sensors. Yap noted: “Some companies don't want to make the upfront investment of installing because they don't understand its value.” Most telematics solutions operate on a subscription model, with monthly fees ranging from $10 to $40 per vehicle, depending on the level of analytics, reporting and integration required.
The third challenge is change management. Implementing telematics effectively also requires new policies, training and change management. “This could be a challenge for businesses used to doing things a certain way,” Yap said. Barron also highlighted the need to change the approach and attitude of many businesses, while other insurance firms pushing telematics uptake have talked about the need for a cultural shift to engage drivers and win their trust. Simon Donovan, executive general manager of DKG Insurance Group, said that brokers can play a key role helping firms understand the technology, the meaning of the data and what they have to implement telematics insurance effectively. DKG’s agency, called Fuse Fleet, has telematics offerings.
The impact of telematics on claims and costs is evident. Barron says the way telematics can protect drivers, their vehicles and bring down costs in the resources sector has become clear in recent years and is now strongly backed by its stakeholders, including insurers. He suggests this is partly because prime movers are such valuable assets: “A prime mover setup can be worth anything from 750 to a million dollars these days, so we're very supportive and so are the insurers, of whatever these firms need to do to protect that asset.” Barron added that telematics is “definitely having an impact” on claims costs in the resources industry, and among some large fleets in other industries. “I think insurers see the value of it, and they will look much more favourably on a business that has a telematics system than one that doesn't,” he said.
Yap estimates a drop in claims by about 20 to 30% for fleets that actively use telematics, noting, “And it's not just about insurance savings, it's also about less downtime and repair costs.” Donovan reports that, in some cases, his Fuse Fleet customers that are using telematics have seen their claims go down by more than 50%.
Telematics is reshaping the landscape of motor fleet insurance in Australia and brokers have a critical role to play in guiding clients through adoption, addressing concerns, and helping them realise the benefits – driving on safer roads, lowering costs, and stronger business outcomes for fleet operators.
