While AM Best reports that commercial auto insurers’ losses exceeded $4b in 2019 (continuing 10 years of worsening underwriting results), creative insurers are seeking to use technology to identify targeted insureds instead of just trying to price their way to profitability.
Insurers must sell to “better insureds” rather than trying to price their way to profitability. Pricing their way to profitability has been a money-losing strategy for 10 straight years now. It was Einstein who talked about the insanity of doing the same thing over and over again and expecting different results. The time has come to identify and price risk differently while actually enabling profitability.
So how does the insurer find the “better insured”? Whenever possible, commercial insurers should seek to incentivize the use of fleet safety technology that not only provides insight into driving behavior and related risk exposure (providing underwriting insight as well as a basis for driver behavior correction) but ideally also interacts real time with the driver with the result being a limiting or elimination of risky driving behavior(s).
Effective real time interaction with the driver means that positive results are not contingent upon the effective fleet management of the program; significant improvement can be achieved in the direct real-time communication between driver and technology in the vehicle. It also means results do not revert to previous risky levels over time. Behavior “recidivism” is an Achilles heel of the driver behavior correction process, typically requiring continual feedback and monitoring to achieve sustained improvements over time.
There is no better example of simple risk correction than implementing effective cell phone distraction management, a largely “self-correcting” solution. “Self correcting” driver behavior technology can be a key contributor to commercial auto insurers return to profitability. While we saw impressive results in using telematics data for personal lines segmentation and pricing, we are now seeing effective use of UBI applied to commercial markets (with more of a focus on driver behavior combined with contextual insight). Cell phone distraction avoidance technology can not only accurately identify driving risk, but can interact with the driver, real time, as an aid in the correction of that risk.
In today’s world of ever more aggressive plaintiff legal actions, cell phone distraction avoidance is a mandatory “must have” solution. Spiraling litigation costs are a large driver of commercial auto losses and proven cell phone distraction is the poster boy for a big plaintiff payday.
Insurers, who are, by definition, removed from actual drivers, should seek to incentivize the use of solutions where the results are less in question. In other words, it is advisable to incentivize insured fleets to implement technologies that interact with the driver, real time, in an effort to correct risky behavior while it is happening.
OK, let’s summarize—cell phone distraction avoidance technology is very low cost, addresses a very significant cause of accidents (25% of accidents), provides consistent, very clear measurable results, no (or little) required added hardware beyond an app on the driver’s phone, no return to previous risky behaviors (recidivism) because of constant real-time interaction with the driver, hmmm….sounds pretty compelling.
To read more insightful articles around Fleet Safety, and specifically, phone distraction check out our recent article below…