Breaking down the barriers part three: reinventing outdated underwriting models

Unlike many other industries, the commercial motor industry has been using technology to track the performance of their fleets for years. But, despite all this investment in technology, Fleet Managers have not seen a great deal of change to their insurance premiums for three primary reasons:

1. False positive alerts, sheer volume and disparity of the data produced by various telematics providers;

2. The silos across the insurance industry 

3. The outdated underwriting models being used by the insurance industry

In part one and two of this series we talked about why there are challenges with data and how to overcome them, as well as looked at a divided insurance industry. Now we’ll talk about the need for insurers to reinvent their existing underwriting models for telematics technology to deliver value to all parties in the value chain. 

The way it’s always been done

When it comes to pricing fleet insurance, underwriters will usually rate fleet risks based on the historical claims experience of the fleet, adjusted to allow for inflation, administration expenses and profit. But, if we think about it rationally, we inherently know that actual vehicle or fleet behaviour, for example corner braking, speed, rural exposure or night driving, is a far better indicator of risk than historical claims. 

Even though this behavioural data is available from telematics systems, the underwriting models are so engrained that it is not a simple case of plugging in new data and generating a more accurate price. Instead, the entire underwriting process needs to be reengineered. This is frustrating for Fleet Managers who have invested in telematics and want to see the data impacting their insurance products, services and premiums. The inability to leverage fleet behavioural data is also a cause of great pressure for insurers. If only they could tap into this data, they would have greater visibility of the risk they are insuring, helping them to more effectively manage their portfolio and reduce loss ratios. 

Setting a new course

Until now, there has not been a clear path for insurers to use relevant behavioural data to reengineer their underwriting models. But, technology has vastly improved, and now there are data platforms that can do the reengineering on the insurer’s behalf. Such platforms can merge driver behaviour data from telematics and video devices with relevant environmental data such as traffic patterns and local weather and provide a clear picture of the risk being insured. Importantly such platforms can combine behavioural data with the insurer’s own claims information and present it in a simple way so they can:

2.  Benchmark clients against the rest of the market                                                                        3.  Understand the impact of new deals on their portfolio                                                              4.  Find opportunities for new products and services                                                                      5.  Automate workflows, helping them to manage pre-claims, reduce collisions and increase the efficiency of claims processes. 

Fleet managers will benefit from a far greater customer service from their insurers who will be able to: 

1. Encourage and reward safe driving behaviour with reduced premium prices and other incentives                                                                                                                                                  2. Automate customer communication, for example regarding driver behaviour data, safety tips, and policy information
3. Improve the safety of drivers and reduce collisions
4. Take control of the claims process to speed it up and reduce costs for example by contacting the policyholder to ensure vital information is gathered at the scene or securing the use of preferred suppliers for repairs. 

The fleet insurance market cannot continue in its existing state. Fleet Managers need to start seeing returns from their technology investment and insurers need to find profit to survive. Advancements in data platforms mean with the right technology investment, data becomes more accurate and manageable. Insurance market players can begin to collaborate, and entrenched underwriting models can be rewritten to grow profits and deliver a greater customer service to Fleet Managers. It will be those forward-thinking insurers that work together with their fleet clients using this technology that will find the competitive advantage they need to survive. 

More information

Concirrus is the creator of Quest Motor and Quest Fleet, which combines multiple data sources in one, simple, easy to use application and analyses them to discover new insights into risk. A technology agnostic platform, Quest pulls together dynamic, real-time data from vehicle sensors, telematics, video and other relevant datasets to deliver:

• A clear understanding of driver behaviour and risk
• Proactive risk management functionality
• Automated collision reports within minutes to assist with FNOL
• New revenue opportunities

Quest enables a transparent relationship between fleet operators and their insurers, as well as reinsurers, retrocessionaires and capital providers, creating value for all. Find out more about Quest Motor and Quest Fleet. 

Read about Concirrus’ partnership with SureCam, the market leader in connected camera technology.