Vehicle Telematics

By Craig, Steven C. | Risk Management, June 2010 | Go to article overview
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Vehicle Telematics

Craig, Steven C., Risk Management



As technology has advanced over recent years, vehicle telematics has evolved from an expensive track-and-trace system to a sophisticated, affordable way to manage vehicle fleets, Developments in consumer technologies such as cell phones, computers, wireless networks and GPS navigation systems have given vehicle telematics refined functionality that fleet operators and risk managers only dreamed of 10 years ago.

Modern telematics devices combine GPS, WiFi, cellular communications, Bluetooth, three-axis accelerometers and even video into small, sleek packages that gather raw driving behavior data that can then be overlayed with geographic information systems (GIS) mapping data, such as road type, weather and speed limit. These devices continue to gain acceptance in the marketplace while hardware and data subscription costs continue to drop. Now more than ever, telematics can be a useful tool.

Value for Fleet Operators and Risk Managers

Telematics devices offer fleet operators and risk managers insight into driving behaviors, including the ability to recognize good drivers, identify risky drivers who should not be behind the wheel and develop training programs for those who need improvement. This can help fleet operators save 10% or more on fuel costs by reducing the time vehicles are left idling, managing the routes taken and monitoring the behavior of aggressive drivers on the road.

Moreover, installing telematics systems into vehicle fleets can not only help to reduce the number of accidents by 20% to 30%, but they can increase operational efficiency by at least 10% through improved logistics, back-office administration, maintenance schedules and fewer vehicles out of service for repair.

Though initially plagued by privacy concerns, employers have seen driver attitudes toward these devices shift from one of suspicion to one of acceptance and value. Many drivers initially assumed companies were adopting the technology as a way to spy on employees or policyholders, evoking fears of Big Brother surveillance. Today, however, many drivers see the value such data can provide--including safety benefits, teen programs, premium reductions and emergency assistance, among others.

Some commercial drivers have also experienced how telematics can help them demonstrate good driving skills and superior customer service. Employers can use the data gleaned from telematics devices to defend their drivers from accusations of speeding, aggressive driving or late deliveries by verifying an employee's arrival at a specific location. Additionally, it allows drivers to schedule appointments in alignment with customer expectations and helps employers eliminate the unauthorized use of vehicles, which can save some fleets up to $900 per vehicle in the first year.

In fact, several studies show that drivers are likely to modify their behavior after a telematics device has been installed in their vehicle. According to the 1995 SAMOVAR Drive Project by the European Union, the most widely cited study of telematics devices in the world, accidents declined 28% after the devices were installed. Fleet surveys by major insurance carriers have demonstrated a 30% reduction in crashes when monitoring engine data and a 20% reduction when using GPS data. Furthermore, a 2007 insurance carrier's fleet survey showed a 37% accident reduction when monitoring driving time and a 15% reduction when monitoring speed.

Risk managers are especially mindful of the safety benefits of telematics through speed reduction. "An enormous body of evidence consistently supports that the risk of crashing, being injured, or being killed increases with increasing speed," wrote Dr. Leonard Evans in his book Traffic Safety. "For fatalities, a 1% increase in speed appears to increase fatality risk somewhere in the range of 4% to 12%, with stronger support for a value towards the low end of the range.

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