Getting ahead of costly motor claims
2023 will see telematics-based commercial motor insurance and motor risk management being promoted by insurers in the Irish market. Telematics can help brokers offer more personalised, cost-effective solutions to their clients and increase their competitiveness in the market. In this article we look at why this is happening now and how brokers and their clients can benefit from this new model to predict, prevent and price motor risk.
[Note: this is an excerpt from a feature in Irish Broker Magazine, February 2023 issue. Full article available here]
RISING RISKS AND COSTS
As the price of vehicles, parts and repairs escalates due to inflation, we can expect that motor fleet premiums are going to face significant pressure in 2023. Electric vehicles (BEVs) sales in Ireland increased 86% in the year to October 2022[1] and along with hybrids, now comprise 40% of the new vehicle market. In addition to relatively more expensive EV repairs, underwriters also report significantly higher claims frequency for EVs, likely due to factors such as increased acceleration capacity and lack of engine noise.
Tragically, 2022 saw 17 more lives lost on Irish roads compared to 2021. With up to a third of all fatalities involving someone driving for work, the RSA, HSA and An Garda Síochána remind businesses that “employers, managers and supervisors must, by law, manage the risks that employees face and create when they drive for work”[2]. Their message is that the majority of these collisions are predictable and preventable so businesses need to be proactive. As we discussed here in a November 2021 article, [3] reducing crash risk and costs can be compatible objectives.
For diesel and petrol vehicles which make up 97% of the 2.45M vehicles on our roads[4], fuel, servicing and maintenance costs have all seen increases beyond inflation in the last two years.
Another factor is a 20-year low unemployment rate of 4.3%[5] which may cause some employers to take on candidates with a poor or limited driving history. On average, 20% of drivers represent a much greater risk on the road than their peers and account for 80% of a business’s incidents, claims and increased costs that could impact business reputation or even continuity.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
In 2023, brokers and their clients alike will face increasing market expectation to show that their operations are sustainable. The new EU Corporate Sustainability Reporting Directive (“CSRD”) aims to ensure that companies publicly disclose adequate information about the risks, opportunities and impacts of their activities on people and the environment. It comes into effect for large businesses from 2024 with for SMEs from 2026.
Insurance brokers can help their motor fleet clients improve their ESG performance in several ways:
· Telematics-based policies: by offering telematics-based policies, brokers can help fleet clients monitor and improve their fuel efficiency, reducing their carbon footprint
· Risk management: providing advice to clients on how to improve the safety of their fleet operations. This can help reduce the number of crashes and incidents, which can improve the fleet's overall safety record and reputation
· Sustainable procurement: advising their clients on how to source more environmentally-friendly vehicles, as well as other products and services that support their ESG goals
· Data analysis: analysing data from telematics devices and other sources to identify trends that can help fleets improve their operations, reduce costs and improve ESG performance
· Compliance support: helping their clients navigate ESG and other reporting regulations and ensure they are in compliance with local laws and regulations.
One example of how clients can reduce costs and CO2 emissions is by measuring fuel-use and rewarding eco driving. As a rule-of-thumb, 20% of drivers in any fleet use at least 20% less fuel than 20% of their peers with a heavy-right-foot. Eco driving can typically save €300 per vehicle per annum and a fleet of five cars or vans can save a tonne of CO2 a year[6].
DATA DRIVEN
Telematics data is of strategic and operational importance to motor insurers. When insurers have access to live vehicle and driver data – via smartphone, beacon or hard-wired devices - it is transformative. Real-time data on vehicle mileage, speed, location, crash events as well as driver inputs to the vehicle, such as acceleration, braking and cornering outside safe limits, are crucial when managing risk. Better data - when acted upon - translates into improved risk management and leads to sustained competitive advantage for insurers because they:
· “Improve risk selection and the ability to price selected risk more accurately
· Allow easier verification of compliance with terms of the insurance policy, minimise leakage and mitigate fraud
· Automate key steps within the claims process, reducing costs with automated first notice of loss (FNOL), vehicle triage/assignment and subrogation
· Help improve customer retention with faster claims response, more competitive premium pricing, engaging content and gamification
· Build value-add and differentiation for intermediaries (brokers, agents and MGAs)
· Generate sustainable competitive advantage for underwriters.
· Grow shareholder value with greater enterprise value and market capitalisation”[7].
Brokers can also provide consulting services to their clients on how to improve driving behaviour and reduce risks, which can lead to cost-savings and improve safety.
THE ROAD AHEAD
Brokers can help their commercial motor insurance clients reduce motoring costs and improve ESG performance, by providing risk management services and telematics to predict, prevent and price motor risk.
While larger brokers may have inhouse expertise, a motor risk management or telematics provider can be an invaluable partner for insurance brokers looking to sell telematics-based policies to commercial motor fleets. These partners can help brokers navigate the technical and regulatory aspects of implementing telematics-based policies, provide valuable insights and data analysis and help brokers offer more personalised and cost-effective solutions to their clients.
In November 2021, DriverFocus introduced AVERT™ (https://www.driverfocus.ie/avert), a low-cost insurtech offering for insurance providers and their commercial motor clients who operate five or more cars or vans. Learn more here or ask your broker about AVERT™.
SOURCES
[1] SIMI (October 2022) – Electric Vehicles power ahead
[2] RSA, HSA, An Garda Síochána – Driving For Work website
[3] Irish Broker (November 2021) - The path to sustainable, low-cost motor insurance for SMEs
[4] SEAI – Electric vehicles including hybrids on Irish roads today total over 67,000
[5] The Irish Times – Unemployment falls to fresh 20 year low – December 2022
[6] Save a tonne – A guide to eco driving for any business with five or more cars or vans
[7] https://www.telematicswire.net/auto-insurance-and-telematics/