How To Reduce Fleet Costs With Telematics Fleet Insurance

As all fleet managers know, insurance is one of the major expenses involved in running a motor-based business operation. Fewer fleet managers really understand how much they could control these costs for themselves. This page is a long read, but it explains the inside story.

Using a telematics vehicle tracking system could slash your motor fleet insurance to a third of its current cost, or even less. This depends on how much your current fleet insurance premiums are being bumped up by a high claims rate.

The great thing about this is that you don’t need to spend a lot on a really expensive telematics system to achieve the benefits. Very affordable vehicle tracking with software that includes driver monitoring (sometimes called an IVMS or In-Vehicle Monitoring System) will gather all the information you need to take control of your fleet and, as a result, your insurance costs.

You don’t need to invest too much time in using the system either. You just need to know what to focus on, and how to turn it to your company’s benefit.

Who is this guide for?

The information in this article applies equally to a vast fleet of international hauliers or a micro-company with two vans. A lot of the information on this page about how insurance companies work applies equally well to your personal car insurance, which makes it doubly useful to know.

First Notification of Loss (FNOL) and Fleet Insurance Claims

FNOL – which insurers call “effnol” – stands for First Notification of Loss, and it means the date when the insurer is first informed that you are making a claim.

How do you keep the total cost of your claim cheaper for your motor fleet insurance company? Report crashes or other incidents immediately and provide full information.

Why do you want to keep the costs down for your insurance company? The longer you delay, the higher the total costs will be to your insurer. This ultimate total cost is what your insurer feeds into their price algorithm at renewal, so it will bump up your premium for several years to come.

You don’t have to claim for every incident

You should also consider if you actually want to claim for all accidents. Although you should disclose every incident to your insurer, this does not mean you have to claim for them. In some cases, it may work out cheaper on the long run to pay for certain repairs yourself. You would do well to discuss this with your broker. They can advise you on the best course of action to keep your fleet insurance premiums under control and make sure you are sharing all the information you should do with your insurer. Insurers call this a “fair presentation of the risk to be insured”.

FNOL should always be on the day of the incident

Vehicle tracking can make sure you know about accidents as soon as they happen, so you can make FNOL without these costly delays.

The main reason you should always make your FNOL to your insurer the same day is to keep other companies out of the whole arrangement. They will bloat the costs, usually without improving the outcome.

Here are some examples.

Imagine one of your van drivers, Steve, has rear-ended a car, and it was his fault. He has caused moderate damage to the car and whiplash to Sally, the lady driving the car.

How claims can be handled when FNOL is on day 1

You report the accident by phone to your insurance company the day it happens. You have given them contact details for the Sally, injured lady, so your insurance company can phone her.

Steve is polite and reassures Sally that his company will take care of everything.

Handling the claim: They can organise car repair by their preferred repairer, and a hire car through their usual provider for a few hundred pounds They also offer her medical care and a medical assessment report which Sally agrees to, without involving a lawyer. This means your insurer is handling everything with no other parties involved, which keeps all the costs as low as possible.

How telematics can help: A vehicle tracking system in Steve’s van can make sure this happens. This works by having a G-force sensor in the van which detects that it stopped very suddenly. It sends an app or email alert to the fleet manager as soon as the accident occurs.

The fleet manager then phones the van driver to make sure he takes down all the contact details of the lady in the car. This should include her phone number, vehicle registration and details of the damage, and her insurer and any other contact details.

He should also note down where he was driving and at what speed, and the position of the other vehicle on the road. If you use vehicle tracking, this will be recorded already in the software, making it legally valid evidence. If you do not have vehicle cameras, tell your driver to take lots of photos of both vehicles and the road layout, as well as the damage to both vehicles.

How your claim might be handled when FNOL is after several days

Imagine the same accident, but this time the fleet manager reports it after five days. The only information Steve, the van driver has taken from Sally in was her name and the registration of her car.

Handling the claim: In this scenario, Sally has already called her own insurer and they have arranged repair of her vehicle. This means your insurer will have to pay back her insurer for the repairs that they have organised. It is too late for your insurer to negotiate a price reduction, so the repair costs more than it would have done in the first scenario.

Sally’s insurer has also organised a hire car for her through a credit hire company. Hiring a car on credit costs well over three times the hire car that your insurer could have provided for her, so the cost of this alone is edging up to £2,000.

She has also instructed a solicitor to pursue her injury claim, which has already added £1,000 to the medical costs. They have arranged physiotherapy and submitted a claim for compensation.

How telematics can help: For companies that do not use telematics, and rely on accident reports from their drivers instead, this delay of a few days is fairly common. It is particularly common if the procedure for reporting accidents that don’t put the vehicle out of action is the driver completing a form, rather than having to make a phone call immediately.

What happens if FNOL is made after 2 weeks

In this scenario, you reported the accident to your insurance broker, who has told you they use a claims handling agency.

Handling the claim: The agency reported the bare facts to your insurer after two weeks and told them that a claim form, with more details, would follow later. The claims handling agency sends you the form to complete. Meanwhile your insurer cannot make arrangements regarding the repair of Sally’s car, because they do not yet have the information which tells them whose fault the accident was.

Therefore the car goes in for repair on credit, to be paid later. Using credit repair adds several hundred pounds to the cost.

The hire car is also on credit, bumping up the cost of hiring it from hundreds to thousands of pounds. The credit period is 30 days, meaning your insurance company is supposed to pay Sally’s insurance company within this deadline. But reporting the accident after two weeks means your insurer may not make the payment in time, which will add on late payment penalties to the cost.

The time delay also means that the lawyers have decided to use the boss instead of one of their junior solicitors, because this is starting to look like a tricky claim situation. The head of the legal firm charges more by the hour, and this adds an extra few thousand pounds to the total cost that your insurer will ultimately pay out.

How telematics can help: In this scenario no telematics was used to improve the handling of the claim.

The effect when FNOL is made after 1 month

This may seem far-fetched, but some companies have their solicitor handle claims for them and this type of delay can happen.

Handling the claim: By this time, the insurance company will be desperately chasing up to find out what has happened.

The vehicle repair and the hire vehicle, both on credit, have gone over their payment deadlines. Penalties have been added to the costs, which are already many thousands of pounds.

Sally’s furious, and her solicitor has applied for every type of compensation possible and the legal costs are running into many thousands as well. By this time, an accident that could have cost £5,000 now costs £20,000.

How telematics can help: A telematics system that makes sure the fleet manager knows about crashes and other incidents in real time, and a company policy that makes sure insurance claims are filed the same day, could have kept the cost of this insurance claim to a quarter of the size. This would have had a dramatically lower impact upon the fleet insurance costs at next renewal and made the company a much more appealing client to any insurance company.

Claims handling agencies will bump up costs

Beware of insurance brokers who say they have a relationship with a claims handling company. They sometimes tell you this as if it is a handy benefit to you. What it really means is that your broker gets a “kickback” payment for referring you to the claims handing agency, and that the agency gets paid for its services by your insurer.

Claims handlers have no motive to keep your claims cost down

Claims handlers are usually paid on a sliding scale proportional to the size of the claim. This is not to your benefit at all! It means that the more the payout costs in the end, the more they earn. They have literally no incentive at all to keep your claims costs down and help you keep your premium under control.

This can make the total cost of your claim bloat obscenely. Your insurer pays it all when the claim is settled, but who then pays for it over time? You do, in the form of premiums over the next few years which can easily end up three times higher as a result.

Insurance brokers handle claims for a fixed fee

Brokers usually provide claims handling as part of their overall services to clients. Their payment for this is agreed at the start of the year.

Brokers can help keep renewal costs down

The real value of a broker when you are handling difficult claims is when it comes to renewal time.

If you have any claims open when you are asking for renewal quotes, the insurers will base their prices on an estimate of the final cost of the open claim. You can be sure their default position will be to assume the highest possible total cost, to play it safe for themselves.

A good broker will be able to negotiate on your behalf so that they use a more realistic estimate: then this is fed into the insurer’s pricing algorithm, the effect of this can be to reduce the price you are quoted, sometimes dramatically.

What to write down when you are in a road accident – and how vehicle tracking helps

According to Fleet News, AXA Insurance has estimated that failing to capture third party information can inflate overall incident costs by 965%. As one of the largest vehicle insurers in Europe, AXA says this would turn a £1,000 bill for a claim into a painful £10,650.

What’s more, AXA has seen claims that they say should have cost £5,000 spiral up to £50,000.

Legally valid evidence that telematics systems can provide

Telematics can give you many types of legal evidence. This evidence is made available to the fleet manager with a matter of just a few seconds delay. This means all of it can be sent to the insurer along with the First Notification of Loss (FNOL).

1. Exactly where your vehicle was travelling before an incident
2. How fast it was going and if this was within the speed limit
3. If your driver applied his brakes and at what point he did so
4. Dash cam video footage showing exactly what he saw and what happened prior to the accident
5. Additional video taken behind and all around the vehicle
6. Video from inside the cab showing whether the driver was using phone, or distracted in any other way, which might exonerate him from liability.

Video footage from vehicle cameras with your telematics or vehicle tracking

Imagine the scenario. One of your drivers has been in an accident. The other person says it was your driver’s fault, but he says it was their fault. When disputes turn nasty and large amounts of money are involved, lawyers are brought in and the costs go up even more.

Cloud-based vehicle cameras

All this can be prevented if you have a film of what really happened. Dashboard cameras that connect to your telematics system and use the cloud can send the fleet manager video footage automatically as soon as a vehicle brakes or stops sharply.

Vehicle cameras are often very popular with drivers, who know they can defend themselves easily against false accusations.

These dashcams can be forward facing, or forward and rear-facing cameras called dual vehicle cameras. They capture footage of other drivers who may rear-end you, and any accidents that occur while reversing or parking. They are essential if there’s a chance that the vehicle could be hit while the driver is not in it – this applies to any vehicle that has to be stopped and parked on the roads, or potentially anywhere outside the depot.

Dual cameras or multi-camera installations

Dual cameras are especially useful for multi-stop delivery vehicles that may sometimes have to stop in less than ideal spots. Parking near corners or entrances to make certain deliveries means the van risks being clipped by passing vehicles while the driver is not there as a witness. The vehicle camera works as his eyes while he is working away from the vehicle.

The camera solution for HGVs, moving machinery and other working vehicles, such as construction equipment, is a multi-camera installation. This can give you evidence from all around the vehicle. This is what you will need if your driver damages property, or injures a pedestrian while reversing or parking, for example.

Where and when your business vehicles work

Can you modify how your fleet works to reduce its insurance risk?

Your claims record is one of the things insurers will feed into their algorithm when quoting for your business alongside your vehicle details and driver ages. The next thing they will be interested in, if your telematics system can give them the answers, is how and where your fleet works.

Without this data, the insurer will assume your fleet is an average risk for its type. With actual data, you may be able to prove that your fleet is a lower risk than average.

Your In-Vehicle Monitoring System (IVMS)

Let’s look at the IVMS a bit more.

This data, that insurers can obtain from your IVMS or In-Vehicle Monitoring System, which will be part of a standard telematics system. (It is not available with basic self-install vehicle trackers.)

The telematics software clocks up how often each driver

• brakes harshly,
• accelerates rapidly,
• takes corners too fast and
• goes over the speed limit.

All of these habits increase the likelihood of having an accident.

The driver score

The IVMS in a telematics system puts all the data together into a single number. The average driver would score 1. Above 1 means safer than average driving skills and a riskier driver than most would score less than 1. In other words, if the average of all your employees’ scores is less than one, nobody will be giving you a discount on your fleet insurance this year. If it’s more than one, you can probably shop around till you find an insurer that will.

What if you don’t have vehicle tracking or an IVMS?

Adding just one driver with a poor driving history, or points on his license, to your fleet insurance can raise your premiums by more than 10%.

But the so-called risk profile, which insurance companies use to decide how much to charge you to insure a driver, is usually based on generalisations. Companies look at how long a person has had their license, their age and job, and a few other factors that they pull from statistical models.

For example, younger drivers usually cost more to insure because on average young drivers have more accidents. But some young drivers are the safest on the road, and the cost to insure them could go down with actual evidence seen by the insurer.

With telematics, your insurer can see the facts for your actual drivers, in the form of the driver score and data. With much more detail on the personal risk level of each of your drivers, the insurance company will not have to make generalisations about how likely they are to have accidents.

How to train your drivers to have fewer accidents

With a better claims record as a fleet, insuring your drivers is seen as lower risk. In the world of insurance, lower risk means lower insurance premiums.

How can using telematics improve the driving safety standards of your employees?

The “Big Brother” effect of vehicle tracking

The first effect happens immediately. Drivers know they are “being watched” and it makes them more careful. Most companies report a 20% to 30% reduction in accidents and speeding tickets when they install telematics, even before they start using the software. This is called the “Big Brother” effect as it comes about purely from the drivers knowing they are being watched.

Once you start taking full advantage of the functionality of your telematics software, the improvements only become much greater. The more you make use of what the software can tell you, the more you can reduce the number of incidents your drivers have.

Driver scores from vehicle tracking

Telematics systems give you driver scores on the key criteria, and they can also send the fleet manager email or app alerts.

Motivate your drivers to be safer

Consider incentivising your drivers to improve their scores. Not all drivers are pleased when telematics devices are installed in their vehicles, but rewards for good driving tend to win them over!

1. You could introduce an element of competition, with leader boards to praise the best drivers.
2. Some companies offer bonuses, such as extra time off for drivers with better scores.
3. Some companies give out monthly prizes.
   Did you know an increase of just 5 miles per hour increases a driver’s probability of having an accident by 8.5%? Or that vehicles are over three times more likely to have a crash at a junction than any other location? A telematics system can tell you how often each driver does these things, and give them a score so you can track their improvement.
4. You could offer your drivers specific training or share driving safety tips. You may notice a lot of incidents are happening on certain roads or at certain times of day. This could mean it is the road which is the problem, not the driver.
5. You may be able to tell all drivers to avoid that trouble spot and take a different route.
6. Telematics software will also show you when and where drivers take breaks, and for how long. You may notice some drivers are doing too many miles and not taking the breaks they should. Drowsy driving is a killer, and one of the main causes of road accidents.
7. Make sure your HGV drivers are taking all the breaks that they legally should and that van drivers receive the necessary breaks to avoid driving when tired.

If your drivers are careful and drive safely, your company will reap the benefits.

Good admin routines to keep fleet insurance costs down

These are some of the measures you should be taking to keep your fleet insurance costs under control. A surprising number of fleet managers overlook these. They think they are doing an organised job, but they simply don’t re-check the facts frequently enough.

Keep up-to-date records of points on licenses

Always keep up-to-date records of the points all drivers have on their licenses. You should re-check every 3 months. Checks every 6 months are the absolute minimum.

Missed penalty points can affect your claims and work against you. In the worst case scenario a claim could be refused. It is essential that you tell your insurer about all the points on your drivers’ licenses.

Drivers with a greater number of points on their license will need close monitoring to minimise the risk of additional penalties which could move them into a higher risk insurance category. Adding just one driver with a poor driving history, or points on his license, to your fleet insurance can raise your premiums by more than 10%.

Keep up to date records of convictions

Regularly double check that drivers have disclosed any convictions, however minor or of whatever type. Many companies do this once a year, but we advise once every six months as a bare minimum and better still, once a quarter.

Drivers under 25 years of age

Update details of your drivers’ ages each year. Drivers under 25 cost more to insure, so make sure you let the insurer know as soon as it’s a 25^th birthday.

Younger drivers usually cost more to insure because, on average, young drivers have more accidents. But some young drivers are the safest on the road, and you could reduce the cost to insure them if you offer your insurer evidence from your telematics system.

Sources and further reading

Fleet News: Winning the First Notification of Loss Race

The Chartered Insurance Institute

The Association of British Insurers

Lloyds of London (insurance underwriter) claims procedures