Comment: Why data is the future of fleet insurance
Mark Musson, founder, CEO and chief product architect at Humn.ai, the company behind fleet insurance proposition Rideshur, comments on the future of fleet insurance.
For a long time now fleet managers have known there is a problem with insurance. The way that everyone is penalised for the actions of a few. The way that policies bear no reflection of individual performance. Data-driven insurance was much vaunted more than a decade ago. However it turned out to be an incredible theory that failed to live up to even its minimum potential. The ideas were there, but the technology simply wasn’t. There’s now a new model in place, and all things fleet insurance are about to change.
The problem with the traditional fleet insurance framework
More or less since the practice began, fleet vehicle insurance has been operated using a single model. A limited set of static risk factors are assessed, and policies are levied. These factors include the size and average age of the fleet, driver arrangements and overall fleet safety record. But no account is taken of individual driver performance. This means that one or two poor performers have the potential to drive up the insurance cost of the entire fleet. Even if corrective measures have been taken, or if those individuals have since left the company, their actions continue to impact the profitability of the business. That’s why data-driven insurance was such an interesting proposition for fleets. But it didn’t reach fruition.
Why data-driven insurance initially failed
The original idea of data-driven insurance fell short because the necessary tech just wasn’t there. The data could be gathered, but it was unrefined. We were dealing with quantity over quality, and the volume of data was just so vast that it couldn’t hope to be analysed using the tech that was around at the time. It’s only a few years since the original proposition. But with advanced analytics and the further progression of machine learning, we now have the tech to extrapolate the data into useful packets suitable for the insurance market. So, what does that mean for fleet managers?
Why data-driven fleet insurance is now the only future reality
For insurers and fleets, data-driven insurance presents a genuine risk management proposition. Active, real-time data collation allows for informed decision making. Insurers can create policies based upon useful, recent data. While fleet managers can mitigate insurance needs by putting corrective measures in place for drivers who need to improve their performance and reduce their potential risks.
Fraud is one of the key drivers when it comes to insurance pricing. ABI reported that 55,000 fraudulent motor insurance claims were made in the UK in 2018, worth a total of £629 million. The insurance industry spends around £250 million annually, trying to detect and prevent the problem. With a system in place to reduce the potential for vehicle insurance fraud, total policy cost would decrease.
With data-driven insurance, individual driver’s personal driving characteristics are recorded. This means that false claims and fraud become less possible. Because, try as you might, you simply can’t emulate someone else’s driving style in a manner that can confuse an algorithm.
Fairness & explainable pricing
Lastly, data-driven insurance rewards good driving and risk minimisation. By taking into account actual behaviours and real-time environmental risk factors, such as comparing potential routes and suggesting the safer option, policies can be created with explainable pricing, and drivers rewarded accordingly. In many cases, it will take more than money to improve driving technique. But it’s not too far a stretch to believe that a further consequence of data-driven insurance could be improved road safety for all. Preliminary data suggests that the implementation of data-driven insurance policies have the potential to produce a reduction of more than 50% in accident frequency.
Rideshur’s data-driven fleet insurance employs machine learning to record hundreds of data points from vehicles and the environment every second. Advanced analytics programmes decipher that data, creating detailed reports of driver behaviour. The result is a comprehensive insurance proposition that has both fair, explainable pricing and actually reduces risk. It has the potential to be behaviour changing – a step towards keeping drivers and other road users safer. And for fleets, it can have a massive impact on P&L. Personally, I can’t see any other future for fleet insurance.