Driving Change in Commercial Auto Risk Management

At the 2019 Advisen Casualty Insights Conference, a panel discussed the challenges and opportunities in the commercial auto market. The speakers were:

• Ellen Greiper – Partner, Lewis Brisbois (Moderator)
• Eliot Feldstein – Senior Vice President, Lytx
• Andrew Johnson – Global Head of InsurTech, Willis Towers Watson
• Pete Noteman – Technical Director Auto, Zurich

2018 will be the 8th consecutive year of combined ratios over 100% in the commercial auto marketplace, and it appears the combined ratio will be worse this year than ever before. There are many issues driving these poor results including nuclear verdicts, increasing repair costs, and distracted driving resulting in more auto accidents.

The evolution of telematics in the auto marketplace has been significant. Vehicles have an increasing number of monitoring devises manufactured into them, and more employers are using telematics as a method of monitoring their vehicle fleets. Telematics have been shown to reduce auto accidents by up to 30%. Telematics combined with effective coaching will change the way people drive. The improved driving technique becomes engrained in how they behave every day, at work and in their personal vehicles.

As an insurance industry, we need to incentivize the use of these telematics as standard equipment into vehicles. The information they provide on the driver is an invaluable underwriting tool. The future of auto underwriting is around data so the more data the more accurate the underwriting will be. It’s also important for carriers and risk managers to share information around their success stories to incentivize others to consider these tools.

Risk managers can be hesitant to let carriers monitor all their vehicle activity because while it will reduce losses it also exposes all the flaws in their fleet management program. For example, if they tell you 90% of their driving is local delivery during the daytime and the telematics tell a different story that could results in higher rates.

Getting employee buy-in with telematics and driver training programs is important. There is a tendency for employees to view these things as “big brother” looking over their shoulder. It is important to show the drivers how these tools will decrease their accidents and improve their safety. The goal is to identify the problems and train drivers to correct them, not to fire drivers.

It is important to combine telematics with video monitoring to get the full picture of what is happening. For example, the telematics will detect hard braking or acceleration. Where the video can show what was happening so you can determine if the behavior measured was appropriate for the situation.

Telematics have limits too. Close to 30% of fleets use some form of telematics, yet the commercial auto combined ratios remain high. Just identifying problems does not solve them. The telematics need to be combined with driver training programs. One problem is that perhaps company risk managers are not the best people to train on driver safety. If you have a union environment you need to have them participating in these endeavors.

In the personal lines space, carriers are incentivizing drivers to install apps on their phones to discourage distracted driving. These apps can detect you are in a vehicle and will provide you with “rewards” if you don’t pick up your phone while you are driving. Knowing that distracted driving is the leading cause of accidents it is important for carriers to do all they can to incentivize good behavior.

It is estimated that automated technology in vehicles could reduce accidents by up to 40-50%. This includes things like automatic breaking, auto following distance, and lane assistance. However these technologies also have limits. There are concerns that drivers will pay less attention because of a reliance on the automated systems. Some people think these automated things mean they have a vehicle that is automated and that is not the case. The automation right now is designed to assist the driver, not replace their skill and judgement.