Something South African Fleets and Insurance Companies Should Consider
In terms of adopting usage-based insurance programs, South African fleets and insurance companies are facing a moment of truth as powerful evidence of their advantage for both continues to pile up. This is demonstrated in the growing number of fleets implementing the concept in Europe and North America. According to research conducted by Berg Insight, as of the end of 2017, both continents had reached 18.4 million insurance telematics policies. With an an increase of more than 4 million new policies from 2016, the study firm estimates that by 2021 the total number of insurance telematics policies will increase to more than 60 million – 30 million in Europe and 35.2 million in North America – proving that implementation of the idea is something to be regarded by South Africa in the near future.
What is Usage-based Insurance?
Also known as insurance telematics, usage-based insurance refers to when insurance companies use driving behaviour data derived from a telematics device to price or determine a fleet’s risk cost. So, instead of the insurers using a number of variables including the driver’s gender, age, and road records to determine the risk cost, they use the driver’s real-world driving data to calculate the rate of the insurance premiums.
Read more on how telematics works.
User-Based Insurance in South Africa
Although the idea of charging fleets for how they drive has existed for quite a few years, it is yet to be fully adopted by South Africa. Currently, insurers only reward fleets for having a telematics device for the function of stolen and recovery because of the high prevalence of car theft and hijacking in the country. Recent statistics published by the Institute for Security Studies indicate that hijacking has risen by 55% over the previous four years in South Africa, with at least 40 hijackings taking place daily. And for fleets, telematics is only beginning to gain traction as a device for tracking driving behaviour for risk management rather than just monitoring vehicles.
How SA Fleets and Auto Insurance Companies Benefit from Adopting Insurance Telematics
The implementation of usage-based insurance programmes in the country will have the following potential benefits for both fleets and to insurance companies:
- Using driving data provides both fleets and insurers a better and more precise risk evaluation instead of insurers basing their premiums on traditional rating methods that typically concentrated on drivers age, gender, marital status, driving records, and insurance scores. This will assist insurers accordingly in the calculation of fleet insurance premiums.
- Adopting insurance telematics provides real-time driving data that fleets and insurers can use to reward/discount drivers that engage in the best and safest driving practices.
- With the petrol price at a high level, and not to mention the vehicle maintenance costs, fleets are increasingly searching for areas where they can save. Implementing insurance telematics can assist fleets save up to 40% on their insurance premiums, according to Fleetio.
- Usage-based insurance can help fleets improve their drivers’ risk profile. By accessing driving data, fleets can encourage drivers to embrace good driving habits as there is a potential reward for those involved in good driving. This in turn also implies insurers will be able to spend less on paying out accident claims.
- In case of an accident, fleets and insures can use driving information to compile a report of what occurred before and during the car crash. This will assist fleets to determine who was at fault in the incident. It will also assist insurers investigate the occurrence of an accident and catch out fraudulent claims.
It is evident from the above that the adoption of usage-based insurance is mutually beneficial for both the insurer and the insured. South African fleet owners will profit from affordable fleet insurance premiums and insurance companies will provide accurate insurance ratings based on driving behaviour. This will also assist in reducing accidents and improving driver and road safety.
Author: The Geotab Africa Team
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