By Renee Mielnicki, Esq., General Counsel/Director of HR and Laura Zaharris, VP of Claims, East Coast Risk Management
A new topic regarding fleet telematics has been trending in the field of HR! In this week’s blog, I am proud to be joined by Laura Zaharris, our Vice President of Claims, who is an expert in the insurance industry. Together, Laura and I can provide some valuable insight to our clients and readers about the use of telematics in the workplace.
Let’s start our discussion by asking the question: “What is telematics?”
From a high-level, telematics can describe any system that transmits data over a telecommunications network. It is a modern technology often associated with GPS tracking that is used by many companies as part of a fleet management program. Vehicle telematics includes gathering, storing, and transmitting information about specific vehicles for tracking and reporting purposes. These systems often gather and report data about location, speed, idling time, harsh acceleration or braking, fuel consumption, vehicle faults, and more.
Companies are using telematics for a myriad of reasons, such as mitigating the risk of vehicular accidents and to increase efficiency and profitability. Here are some pros and cons to consider before implementing the system in your fleet:
- Increased Productivity and Company Profitability: Examples of how vehicle telematics can increase productivity and profitability for a company include its ability to:
- Track regular routes and use the data to plot out better routes for faster delivery and less fuel consumption;
- Re-route fleets in order to avoid traffic delays; and
- Analyze whether drivers are making unreasonable stops.
- Fleet Maintenance Assistance: Routine inspections of vehicles are commonplace, but the ability to have constant diagnostic reports is an even better way of tracking a vehicle’s health and knowing when it’s time for maintenance or time to replace it.
- Increased Efficiency for Dispatching: If a vehicle breaks down, the GPS component can provide the company with its exact location so the driver can be picked up and the vehicle towed. The same is true if a vehicle is stolen since global positioning data (GPS), will provide the company with the tools to track it down.
- Reduces the Risks of an Accident: Since telematics can provide a company with data about driver performance, such as speed and harsh acceleration or braking, companies are able to take that data and use it to improve driver performance to help reduce the risks of that driver causing an accident.
- Insurance Savings and Future Claims Efficiency: Insurance providers may take notice if you use telematics to track your fleet’s safety and maintenance and give you better rates. Many carriers offer usage-based auto insurance to policyholders using telematics and expect these programs to dramatically increase over the next several years. Usage-based programs offer the potential for decreased insurance premiums or discounts based upon safe driving habits. They also provide better transparency on the basis for premium cost changes directly tied to driving history and actual mileage. Similarly, from an underwriting perspective, carriers look favorably on commercial entities that commit to telematics programs to underscore driver safety and accountability. In today’s hardening auto market where insurance can be more difficult to obtain and costly, use of telematics can make the difference in securing standard lines auto coverage at reasonable rates.
In terms of insurance claims, carriers hope to use data from analytics to streamline claims reporting, processing and payouts, eliminating many of the touch points and subjective factors in today’s typical auto claim process. Wouldn’t it be amazing if when you had an accident, your vehicle’s telematics system would automatically report the accident to your insurance carrier, transmit accurate damage information and allow you to receive a damage estimate or final claim payment within hours? That future is not so far off!
While there are benefits to using telematics in fleet management, there are also potential cons to consider as well. Some examples are:
- Low Employee Morale: Since these systems gather a lot of data, employees may feel they are not trusted and that their privacy is being invaded. For this reason, conversations will be necessary with your employees before such a system is installed to explain the company’s business reasons for using telematics. Continued conversations to reinforce business justifications may be needed to help alleviate privacy concerns.
- Potential for Increased Liability for the Company: Generally speaking, employers will be held responsible if one of their employees causes a vehicular accident during the course and scope of their employment under a legal theory known as vicarious liability. Vicarious liability is a form of strict liability (i.e., legal responsibility without the need for the person seeking recovery to prove fault) where an individual is responsible for the action or inaction of another person with whom he has a special relationship, such as an employer and employee. However, having telematics data about an employee’s driver performance may increase a company’s liability where the data suggests the employee is not a safe driver and the company did nothing, or not enough, to change that. In other words, more information may mean more responsibility. Similarly, companies should anticipate that in litigated auto liability claims, telematics data will become more commonplace, much like black box data or dashcam footage is used now for accident reconstruction reports. It may be helpful if the data is favorable to the company driver or it may support the plaintiff’s case if the data confirms excessive speed, driver inattention, etc. For these reasons, it’s important that companies understand the risks and commit to reviewing and using the data to improve driver performance.
- Privacy Concerns: Before using telematics to track company fleet, all federal, state, and local laws should be reviewed to be sure the company will be compliant before implementation. Companies should also consider invasion of privacy claims that may arise from employees due to the amount of detail and data that are tracked and the possibility of intruding into an employee’s private life. For example, an employer that uses GPS to monitor an employee’s use of a company-issued car may track the employee’s movements during both personal and business time. Employers should avoid gathering any data related to what an employee does on their own personal time. A best practice is to have a policy that details when and how telematics will be used. Employees should be asked to consent to the use of telematics under the conditions set forth in the policy. It should be signed off on by employees and then placed into their personnel file. If you have unionized employees, you will most likely have to bargain with the union before using this technology.
For more information on the employer considerations of telematics, please reach out to our HR team at firstname.lastname@example.org. For more information about the insurance dynamics of telematics, please reach out to Laura Zaharris at email@example.com. If your company would like to consider implementing telematics solutions, our sales team can assist you at 724-864-8745 or you may email firstname.lastname@example.org.