The future of commercial auto insurers will be telematics-based

Commercial auto-insurance telematics in the US is increasing in momentum – so much so that a future where all carriers will be telematics-based is looking more and more likely.

 

Fleets are increasingly connected, offering insurers a chance to leverage telematics data effectively. A recent SambaSafety survey of US fleets reveals a significant willingness of fleet managers to share information with brokers and insurers: in fact, over a third have already done so. Among those who haven’t, 74 per cent cite the primary reason as the fact that they simply hadn’t been asked.

 

Telematics is gaining real ground in the US commercial auto-insurance market: 21 of the top 25 commercial auto-carriers have some kind of program in place, according to research by The IoT Insurance Observatory. We have already seen a wave of insurers’ initiatives focused on loss control: 60 per cent of the commercial auto carriers interviewed by SambaSafety have a telematics team (up from 27 per cent in 2023).

 

The old – and barely used – referral programs have evolved into structured safety programs offered by insurance carriers. Nearly three quarters – 71 per cent – of carriers who responded are currently offering, or at least subsidising – these programs. Moreover, the pioneers of these programs have already achieved significant adoption (more than 20 per cent penetration on their book) and showed robust ROIs.

 

An increasing appetite for using telematics data to unlock benefits in their underwriting activities is also emerging among carriers, and the most forward-looking players have started their journey to master the usage of telematics data.

Certain commercial UBI products have already achieved significant scale, capturing double-digit penetration within the largest US commercial auto carrier’s portfolio. Additional offerings are poised to launch, suggesting a clear path to industry advancement.

 

However, the creation of insurance offers priced with telematics data is still in its early days compared with the level of maturity in personal auto insurance. Telematics has already been recognised as a necessary capability; all of the top ten personal auto carriers have a penetration of their new business above 40 per cent, and market best practice has demonstrated the effectiveness of telematics-based pricing sophistication in building a sustainable competitive advantage.

 

The IoT Insurance Observatory forecasts that within a decade, all carriers in leading markets will operate on telematics-based models for commercial lines, as is already happening for personal auto insurance. Fleets will likely:

• Share telematics data with insurers and brokers as a prerequisite for coverage.
• Benefit from proactive risk-prevention measures, such as real-time alerts, safety initiatives from loss control teams and driver incentives.
• Experience improved claims processes, integrating telematics data for seamless collaboration between AI and claims handlers, from FNOL to settlement.
• Receive tailored offerings, including telematics-based services and contextualised risk transfer solutions.

It is important for the sector to move to an integrated holistic adoption of telematics capabilities. Better match-rate and reduced risks allow smaller and more accurate pricing clusters, which means a large segment of profiles will receive a lower rate.

 

Expected losses can be reduced, through both real-time mitigation actions that solve a specific situation, and behavioral change mechanisms which promote safer behaviour. Moreover, in case of a crash the telematics-based process is not only quicker but also minimises the potential for fraud. All these forces combined enable profitable management of auto-insurance portfolios while increasing the availability and affordability of insurance coverage.

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By Matteo Carbone, founder and director, The IoT Insurance Observatory