Newsletter Sign-up

A heavy city bus skids to a stop to avoid hitting a truck cutting in front of it. Passengers get thrown around, some are hurt. A while later, the owner of a fleet of Roto Rooter vans receives notice that it is being sued. The claimant, who had been on the bus, swears that a reckless driver of a Roto Rooter van had caused the bus to brake suddenly, injuring him. Using the telematics logistics systems installed on its vehicles, the company proved conclusively that none of its vehicles had been anywhere near that location at that time. Case closed.

While such a decisive benefit from a telematics device is rare, Monte Yoder, vice president of finance for Hoffman Southwest, the largest Roto Rooter franchisee in the nation, says that without Networkfleet, its telematics system, it would have been impossible to collect the kind of exact data required to refute the claim.

The telematics industry began in the mid-1990s, when the U.S. Department of Defense gave permission for its numerous satellites to be used to support GPS technologies for commercial purposes. Consumers who drive cars equipped with General Motors-owned OnStar, established in 1995, are benefiting by the advent and advancement of telematics. BMW's Assit and Mercedes' TeleAid are other telematics systems for automobiles.

But the major expansion and innovation in telematics has been in servicing the nation's commercial local-fleet and long-haul markets. The growth of this industry has sprung from practically nil 10 years ago to about 1.3 million fleet vehicles in the United States equipped with AVL systems, according to C.J. Driscoll & Associates. The systems are producing annual revenue of more than $1 billion. With total market penetration at less than 10 percent, there is ample room for growth. By 2009, Driscoll estimates, there will be 5.8 million units with annual hardware and service revenues topping $2 billion.

TRACKING MADE SIMPLE

Telematics can follow the historical track of a particular vehicle in a fleet; enable a driver to get directions; locate the closest vehicle to an address; record speed, miles driven per gallon of gas, real-time mileage and idling time; and detect unauthorized use of a vehicle and cargo doors opened or closed.

Additionally, the device provides daily odometer updates and alerts when vehicles have reached predetermined maintenance intervals. It also responds when roadside assistance is needed, and telematics, using the GPS tracking system, can locate a stolen vehicle and coordinate its recovery with the police. The cost of the telematics product and installation ranges from $500 to $1,200, and the monthly service fee is $10 and up, depending on the types and number of reports requested.

Hoffman began installing Networkfleet in July 2004 on about 350 of its Roto Rooter light, medium and heavy trucks and vans. The hardware is the size of a pack of cigarettes and fits under the dashboard. "Logistics was the main function we wanted in a telematics system," Yoder says. "In our business, knowing where the person is is not the same as knowing where the vehicle is. When we can track the truck, we know the driver is under way, where they are supposed to be."

Networkfleet collects and organizes detailed performance and location-based information directly from a vehicle's engine computer and GPS. This information is then transmitted wirelessly from the vehicle and made available to fleet managers via a personalized Web site, accessible 24 hours a day, seven days a week.

"The ability to access the information from anywhere via the Internet," Yoder says, "is a big advantage." He also mentions that the device monitors engine performance and mechanical problems. "As a result of the system," he says, "Hoffman has realized a 150 percent return on investment in the form of reduced labor costs, increased revenue and improved vehicle maintenance. The system helps us dispatch more efficiently. With fuel prices rising, this is highly important."

Joe Salvo, manager of the pervasive decisioning systems laboratory, GE Trailer Fleet Services, says telematics technology allows a fleet manager to quickly have regional fleet profiles and creates further transparency of risk. VeriWise Asset Intelligence is installed in GE Trailer's dry and refrigerated trailers.

"A great time-saver and asset-utilizer is the speed and ease with which a dispatcher can locate an empty trailer," Salvo says, "and send it to pick up cargo. This also benefits the driver who is soon on the road again making money."

Corporate fleets of cars and trucks are valuable assets for achieving sales, service and delivery goals. But there are risks. "Whenever a driver gets behind the wheel of a company car or truck, he or she becomes a risk manager," says David Coleman, PHH Arval's vice president of telematics strategy. "Because companies are liable for the acts of their drivers, they are more closely scrutinizing their fleets and drivers. PHH has developed a product using telematics to help businesses identify and correct unacceptable driver behavior, such as speeding or aggressive driving. The use of telematics has greatly enhanced our clients' capacity to identify real-time drivers who are not driving safely, and our clients are getting positive results in improving their corporate risk profiles."

PHH Arval has several thousand clients representing 625,000 vehicles under management, of which 60 percent are trucks.

Dave Dutch, president of Networkcar, says truck drivers who have been using it for years, especially long-haul drivers, don't complain, don't resent the last bastion of unfettered freedom being monitored. "The electronic records verify their logs," he says. "When the product is introduced in a new fleet, there may be some resistance. It depends greatly on how the owner spins the monitoring to drivers."

"For the good drivers, it is a nonevent. The bad drivers don't like it," Yoder says. "But our guys know that the system will be running, and they adjust to it. And our selling point is by having the system available, we are saving them having to drive around looking for an address, and we can send them to the next job quickly. Also, the data collected can be used as evidence if there is a traffic incident."

INSURANCE BENEFITS?

The president of the Inland Marine Underwriters Association, Ron Thornton, says insurers will not give reduced insurance premiums until they can see benefits of a telematics system. He says there has not been a direct relationship shown between having a telematics system on board and a reduction in claims.

"If I am an underwriter," Thornton says, "and one of my clients has it, I may be more interested in working with the client to come up with a better contract, but whether this has an effect on reducing premiums is another matter."

Tim Donney, marine loss control director, Fireman's Fund Specialty Insurance, says, "We base premiums on past loss experience of a client. There is no up-front reduction in premium for installing a specific product or program."

Over time, if claims are reduced, then that reduction is a positive factor in the renewal premium.

"We insure a number of companies that transport high-tech materials and pharmaceuticals that have high value in each container or truck load," Donney says.

"Telematics GPS tracking can be a deterrent to theft in that it increases the chances of recovery," he adds. "However, there is no single piece of equipment, no silver bullet, that will fix the theft problem completely, yet. If telematics can be developed to effectively deter crime, then if the trucking firm's loss experience goes

"I can't prove that Networkfleet is responsible for a reduction in claims," Yoder says, "but we have had fewer claims in the past year or so. We have advised our insurance company of this, and we are working with our brokers to help us when our policy renewal date approaches."

Almost all of PHH Arval clients are principally self-insured for physical damage.

"We are managing their out-of-pocket expenses," Coleman says. "But clients who have large fleets are looking at improving their loss experience, which will reduce their premiums for other coverages."

PHH Arval has several insurance companies as clients, and some "are in the process of evaluating a new product, PHH Onboard, on their claims adjusters' cars," Coleman says. "They're looking at how each claims adjuster can be best dispatched for the least expense and time."

RONALD GIFT MULLINS, a writer and former insurance editor, lives in New York City.

December 1, 2005

Copyright 2005© LRP Publications