UBI Telematics: The New Industry Standard
Written by Laura Loftus on September 18th, 2019
UBI Insurance is currently reserved for companies with access to the minimum annual premium of $100,000. This is not a program for TNC operators, owner/operators with one car, and is geared towards larger companies involved with providing services for the sharing economy. GET A QUOTE
Usage-Based Insurance (UBI telematics) products entered the personal auto marketplace some time ago. But it is a new concept for commercial auto policies. Whether you own and operate one vehicle in a small rural town or a large fleet in an urban area – insurance companies are always looking for ways to gain more business and limit their own risk. As a result, more and more insurance companies are offering UBI telematics to commercial fleets.
History of UBI Telematics
UBI telematics became popular with the invention of Transportation Network Companies like Uber and Lyft. As these types of companies grew the insurance industry responded by offering more options for UBI telematics. Companies like James River were one of the first to offer pay-per-mile or pay-as-you-drive plans. This got the rest of the world thinking. If Uber and Lyft can pay per mile, why can’t other transportation businesses obtain the same type of UBI telematics?
One reason UBI telematics was more easily implemented for Transportation Network Companies like Uber and Lyft is that the insurance company is not “on the risk” all the time. Most of these drivers carry their own personal auto policies. So, the TNC insurance is only “on” when the driver is logged into the app.
The popularity of TNCs has affected the amount business taxi and limo companies are able to achieve. Traditional companies need to evolve in order to compete against Uber and Lyft. One way to do this is to lower their costs with a UBI telematics policy.
How Pay-Per-Mile Insurance Works
UBI telematics works in many different ways. The first is that you are provided with a device that plugs into the OBD port of your car. The device captures and reports mileage automatically to the insurance company. You are then billed at the agreed-upon per-mile rate.
Another way mileage is captured and reported to insurance companies is through SDK integration of an app you might be used for dispatching vehicles.
In the past, most for-hire, livery risks were charged a flat annual rate. It did not matter how many hours you spent on the road. It also didn’t matter how many miles you drove each month. But, now that UBI telematics is becoming more popular, many companies are offering this structure as an alternative. Additionally, while most of the other personal auto insurance markets may provide this type of pricing structure, most do not capture driver analytics to help you coach and manage drivers.
UBI Telematics from American Business Insurance
As a UBI insurance broker, we are always looking for and creating solutions that are easy for our clients to use. As a result, we have created our own dashboard which captures the trends and habits of your drivers. Some UBI telematics structures actually charge different rates per driver and many will adjust the price mid-term (up and down) based on driver behavior.
Distracted driving is a problem that most UBI insurance brokers are trying to combat. By integrating telematics elements into pricing and policies, we are able to not only reduce the amount of money you are spending each year for insurance but also provide you with tools to limit risk to those markets.
Some of the data UBI telematics products captures includes not only miles driven, but also:
- Hard-braking incidents
- G-Force of accidents
- Excessive speed
- Following too closely
By carefully managing and coaching drivers of bad driving habits before accidents occur, you keep your loss history low and your premiums lower.
UBI Telematics per Contract
While the above options describe UBI telematics for all operations, we can also work with you to limit coverages on a per-contract basis. What this means, is that sometimes the City or State will require a minimum auto limit of $100,000. But you want to obtain a contract to transport patients to and from doctor appointments. Most likely, that contract will require your fleet to have a limit of $1,000,000 or higher. Instead of providing you with a quote that increases the cost for the entire policy to a $1M limit – we can write a separate excess policy that bills you by the trip, or by the mile for the contract only.
Another way to limit coverage is if for example, your city requires the same $100k limit mentioned above, but you drop off at the airport who requires $1,000,000 while on airport property. Instead of increasing the premium for the policy to be $1M all the time, we can charge less of an increase by endorsing the policy to provide the higher limit while only on airport property.
How Does this Benefit Business Owners?
The secret to any business is operating at profitable margins. By keeping insurance costs low, commercial fleet owners are able to put money back into their business for advertising, newer vehicles, maintenance and repair. Also, driver morale will improve because they will know that their good driving habits will be recognized and, in many cases, rewarded.
UBI Insurance is currently reserved for companies with access to the minimum annual premium of $100,000. This is not a program for TNC operators, owner/operators with one car and is geared towards larger companies involved with providing services for the sharing economy. GET A QUOTE