Can Telematics Save You Money?

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Image courtesy of [Bill Pugliano] / Getty Images.

Clive owns Custom Computer Care, a company that provides on-site computer services to businesses. The company owns 35 vehicles that are used by employees to drive to customers' locations. Lately, Clive has become concerned about the cost of operating and maintaining his vehicles. These costs are significant and they keep going up. Clive is wondering whether a technology called fleet telematics could save him money.

What is Telematics?

Fleet telematics is a system that combines GPS technology, computers and telecommunications. Data from GPS-enabled devices installed on vehicles are sent over a wireless network to a central computer. The data can then be tabulated and analyzed in a variety of ways.

The devices needed to implement a telematics program can be obtained from a fleet management company or (in some cases) from your insurer. When telematics is combined with insurance, the result is sometimes called usage-based insurance.

How Does it Work?

Fleet telematics is designed for businesses that operate many vehicles. Here's how it typically works. First, a GPS-enabled device or "black box" is wired into each of your company's vehicles. The devices collect various data. The specific data gathered depends on the on the type of device that is used. For instance, a "black box" may record the time of day, driving time, distance traveled, braking habits, and average speed.

The data from the devices is fed into a computer at a central location.

The data collected from your vehicles can be used for a variety of purposes. For instance, you can track the location of all your vehicles in real time. You can monitor your employees' driving habits. Some systems track vehicle diagnostics, alerting you when a vehicle needs repair or maintenance.

Potential Benefits

Fleet telematics can offer numerous advantages. The benefits you obtain from your system will depend on the data you collect and the manner in which you analyze and use that data.

  • Better Efficiency Tracking your vehicles in real time can enable you to use your vehicles more efficiently. For example, suppose that Customer X has requested an immediate service call. Jane, one of your employees, is available to handle the request but is a 45 minute drive from Customer X. Joe, another employee, is on a service call at Customer Y. Joe will be done with Customer Y in ten minutes and is only five minutes away from Customer X. Clearly, it is more efficient to assign Joe rather than Jane to Customer X.
  • Better Customer Service By using your vehicles more efficiently, you can provide faster service to your customers. Satisfied customers become repeat customers.
  • Driver Monitoring You can use the data you collect on each vehicle to monitor the driving habits of individual employees. If certain employees exhibit poor behaviors (such as driving too fast or slamming on the brakes) you can focus your training efforts on them.
  • Better Fuel Efficiency Certain driving behaviors can waste fuel. Examples are speeding, jack-rabbit starts, and excessive idling. You can educate your drivers to change their behavior.  Better driving habits can improve your fuel economy.
  • Better Maintenance Vehicle diagnostic data can be used to schedule vehicle maintenance or repair. When your fleet is well-maintained, vehicles function better and are available when needed.
  • Fewer Accidents Employees tend to drive more slowly and carefully when they are being monitored. Careful drivers have fewer accidents.
  • Quicker Recovery of Stolen Vehicles Because "black boxes" have GPS capabilities, they can help you locate stolen vehicles quickly.
  • Lower Insurance Premiums By improving driver safety and reducing accidents, telematics can lead to lower rates for commercial auto coverage.

Commercial auto insurers generally support the use of telematics. Some will help you implement a fleet telematics system and incorporate it into your risk management program. Your insurer's loss control representative can assist you in identifying your key vehicle-related risks.

He or she can also help you decide what data to collect, and how to convert that data into useful information.

Employee Resistance

If you implement fleet telematics you may encounter resistance from employees. Some drivers may object to continuous monitoring. You can overcome employee push-back by explaining how telematics will benefit them. For instance, the new system may reduce the amount of time drivers sit idling in heavy traffic. Another way to address employee opposition is to involve workers in the decision-making process. Drivers are more likely to be amenable to monitoring if they helped design and implement the new telematics system.