Every time you call for roadside assistance, every time you schedule a cable installation or repair, and every time you order a book from Amazon Prime with free two-day shipping, you’re receiving a service from a company that operates a fleet of vehicles.
And that fleet of vehicles can be a pretty major expense for those companies. Each of those fleet vehicles needs to be fueled, maintained and insured – all at the expense of the company that bought and operates them. As a result, managing fleets and controlling fleet costs is a priority for all companies with a large number of trucks, vans and cars on the road.
Now, one of the nation’s leading insurance company’s – and Peyton Manning’s favorite insurance provider – is looking to help these companies fight back against the high costs of their fleets by introducing a new, disruptive way in which insurance companies assess risk and price their policies. The result could be lower premiums for fleet operators, as well as a laundry list of other benefits for both Nationwide and its customers.
To learn more about this new program that Nationwide is working to implement, we sat down with the gentleman that was hired to lead the effort, Pete Frey, whose hiring was just recently announced.
Here is what Pete had to say:
Insurance Tech Insider (ITI): Before we get started, congratulations on your new position at Nationwide. For the sake of our readers, can you just tell us a little bit about your background before joining the company?
Pete Frey: The bulk of my career was with American Family Insurance in Madison, WI. I was there for 15 years, mostly leading large-scale business technology rollouts. I worked in different areas of the business: personal lines, commercial lines, life, sales – all focused on delivering different large technology rollouts.
Towards the latter part of my career at American Family, I got involved in connected car telematics and usage based insurance (UBI). American Family was dabbling in it as an innovation-type effort and then they decided to take it to market. That’s when I was brought in and asked to turn it into something that we would operationalize and roll out.
After American Family, I decided to work for a few different telematics providers – a couple of startups that were maturing into adolescence – where I was heading up their products focused around connective car technology. And that’s when I really got into connected fleets.
We would sell telematics products directly to small businesses, mid-sized businesses and large businesses – hooking up their fleets and giving them telematics-connected car services. I did that for four and a half years before joining Nationwide.
ITI: You were recently brought in by Nationwide to oversee the creation of a usage based insurance program and connected business fleet platform. What exactly is a usage based insurance program? How’s that different than traditional insurance programs and why would usage based insurance be advantageous for fleet operating companies?
Pete Frey: Insurance [prices are] traditionally based on drivers experience or information that the driver provides. Where they live. Where they drive. How many miles they drive. What type of vehicle they drive. Then there’s the experience aspect based on claims experience, moving violations – things like that. That’s traditional insurance.
The UBI model takes actual driving experience – things like hard braking, acceleration, the time of day that you are driving – and combines it with traditional rating factors to turn it into new risk variables. Insurance companies can put formulas together that utilize these new variables and come up with new ways of measuring risk. It enables more sophisticated rating and pricing.
Nationwide has built that already on our personal line side. What we’re looking to do is build on that strong foundation and apply it to the commercial fleet side. This would deliver the same advantages as the personal line side, but to fleet owners – they will be able to be rated more accurately in terms of their insurance risk.
Today, one business owner might be rated the same as another, even though one of them has riskier drivers or riskier driving behavior patterns. This UBI program will allow us to rate those safer fleet owners with safer drivers even better – and segment them better – to give them the opportunity for much better rates in the future. It also gives us a chance to offer different types of incentives in the future – potential discounts for safe driving, better driving habits, and other types of incentives.
All in all, it is about providing a better service and better rates for our commercial line members.
ITI: One of the things I’ve heard you say a couple of times is telematics. For the sake of our readers who may not be familiar, can you define what telematics are? What role they are starting to play in insurance and how are they enabling usage based insurance?
Pete Frey: Telematics by definition is a collection of driving and vehicle data generated by a device – even a mobile phone. Many [Nationwide fleet owner customers] don’t have the technology to collect that type of data. By providing that data to them, it enables different types of customer-focused services, including UBI. UBI wouldn’t be what it is today without the ability to collect that data automatically.
Telematics also enables the ability to provide things like fleet vehicle management, vehicle tracking, vehicle health management, and other, different types of services that benefit the customer. So, it’s a very powerful tool and I think one that we’ve just started to see a lot of benefits and advantages of.
ITI: You’ve discussed the pricing and risk assessment benefits that come from the use of telematics. What other benefits does this technology generate for fleet operators?
Pete Frey: There is more to it than just insurance – there are other fleet benefits that telematics and UBI can deliver. I think safe driving awareness is one. The information we capture enables an understanding and knowledge of driver behavior, enabling operators to identify and point out things that they’re doing that they shouldn’t. That type of information can be valuable to fleet managers or business owners because you’re pointing out where certain drivers might need coaching or bring special awareness to their habits.
Another is vehicle health and maintenance, which is extremely important to fleet managers – especially for smaller fleets. If a vehicle is out of commission, that’s a day or two days without being able to do deliveries or service their customers. That is extremely impactful to the small business owner. Being able to understand the health of the vehicle and what’s going on with that vehicle is very important to them.
Finally, there’s a driver location and vehicle utilization benefit. These are all things that lead to productivity and efficiency gain for fleet owners.
ITI: What other benefits does it generate for Nationwide?
Pete Frey: I think beyond the rating and the pricing, data helps the company predict risk and potential loss. That information is extremely valuable because it enables us to see the potential for claims. It also enables us to give information to our members – our commercial lines members – on risk and behavior and the ways they can reduce that risk.
The more data we accumulate and are able to see, the more we are able to predict loss and identify areas where we can help our members become better drivers, more responsible business owners and better fleet owners. This can help to keep them safe, and maybe even save them money. It’s another very valuable service we can offer to our members while allowing us to be better at pricing and risk management.
ITI: Where do we go from here? What’s the future of IOT and telematics look like for insurance?
Pete Frey: I think this is the tip of the iceberg when it comes to the connected business. We’re heading in an important direction with connected vehicles and how we manage vehicles and manage fleets. If you look at the way the technology is gaining speed, I can definitely see a connected business environment where we use sensors and IOT technology to capture data about any number of things – vehicles and even other property – to add value for our commercial members.
People are expecting that type of connectivity – they are expecting Alexa to speak to them about their vehicle and its whereabouts. Everything is becoming connected, and I think you’ll see the same thing on the business side.
For Nationwide, bringing these new connected technologies to our customers will help to build trust and credibility – will build stronger relationships between us and our commercial members. I think the way we use the technology to collaborate with our customers is going to look different in the future. It will be extremely positive and extremely valuable for all sides.