They say a tool is only as good as its user. Over the past 50 years, telematics has evolved into an essential tool for both the personal and commercial auto insurance sectors. However, telematics is not yet being used to its full potential in the commercial space.
While telematics has driven more precise policy pricing and improved underwriting profitability in the personal auto space, the commercial transportation sector faces challenges that have limited the use of telematics. The industry has high driver turnover and without a stable pool of drivers, it becomes hard to track long-term behavioral trends that can help develop consistent, actionable insights. This also makes insureds reluctant to act on the data they do have to enforce meaningful accountability.
While the data provided by telematics is comprehensive and visually appealing, its effectiveness hinges on how it is used. Insurance companies in the commercial transportation sector that want to more effectively implement telematics must first understand the issue they are solving and then be willing to implement change, both with and without insured action.
Trucking faces unique challenges
The number of trucking companies adopting telematics has increased significantly in recent years, with
Meanwhile, rear-facing cameras, which are meant to monitor driver behavior, are frequently repurposed—sometimes as a place to hang a baseball cap.
Yet companies rarely discipline or remove poor-performing drivers, not because the data is not there, but because of the ongoing driver shortage. A
Because it is so difficult to fill open seats, letting a driver go often means losing revenue while a truck sits idle. The same report put the weekly losses to the U.S. freight industry at $95.5 million thanks to understaffing.
That kind of economic pressure can hamper meaningful use of telematics. Underwriters are reviewing new and renewal accounts constantly, but if the insured is not willing to act on the data, such as removing or retraining high-risk drivers, then it becomes difficult to drive change.
Improving telematics
Telematics has introduced new possibilities in risk mitigation, underwriting, and claims handling—but the true extent of its impact depends on how actively it is used by the insured.
For example, in risk mitigation, the technology offers real-time data that can help identify and correct dangerous driving habits before they result in losses.
In underwriting, it enables more informed risk selection, by highlighting driver behavior patterns and fleet performance. And from a claims perspective, telematics, especially dash cam footage, can be instrumental in clarifying liability and expediting claim resolution.
However, despite these capabilities, the broader impact of telematics on loss ratios remains unclear. Until fleets consistently use the data collected to drive changes, the technology's full potential in transforming commercial transportation insurance will remain largely theoretical.
Benchmarking the industry
While telematics may have limited impact without insured action, it still offers valuable data during the underwriting process. Telematics data provides meaningful benchmarks for underwriters, allowing them to compare a new account against existing fleet data and national averages. Such comparisons drive more accurate policy pricing and forecasting.
For example, when prospective clients provide historical telematics data from their previous provider, underwriters can assess how their drivers rank relative to broader trends. And, if at least 12 months of data is available, underwriters can determine whether the company's risk profile aligns with the rest of the book—offering insights that support sound risk selection.
A new frontier
Another strategy that can play a significant role for the trucking insurance sector is combining telematics and captive solutions.
In a captive structure, the trucking company is both the insured and the insurer, giving them direct financial exposure to claims, meaning real skin in the game.
Safety is more than just a compliance concern in this model; it is a financial imperative.
When a trucking company controls both the risk and the insurance side, it is far more motivated to act on telematics data. In some cases, it becomes clear it is more cost-effective to leave a truck parked than to risk a severe loss by assigning it to an unqualified driver.
In short, a company that would have to bear the losses from unsafe driving behaviors has a stronger incentive to act on telematics data. It would be motivated to implement changes quickly, because it would feel the financial impact directly. The result is a more disciplined, data-informed approach to safety and risk management.
Whether using a captive or a traditional carrier, telematics is a tool in the toolbox that can benefit both insurance organizations and companies. The technology can provide valuable data during the underwriting process, and the more data available, the better an underwriter can determine whether a company's risk profile aligns with the rest of the book, offering insights that support sound risk selection. That data can empower companies to operate more efficiently and safely.
In the end, telematics relies on the human capacity for adoption and implementation before it can be leveraged to its full potential. Changes coming to the sector suggest the opportunities telematics offers are soon to be more fully realized.
