The trucking industry has not been particularly technology-focused, but it looks like that’s all about to change.
As of December 18, 2017, truckers that travel beyond a 100-mile radius are required to keep and maintain electronic logging devices (ELDs). These plug-in devices are programmed to track drivers’ hours, including time spent waiting to get their hauls loaded and unloaded. Now, according to the new federal mandate, which was issued by the Federal Motor Carrier Safety Administration (FMCSA), their maximum 11-hour daily driving limits will be closely monitored. The industry has been up-in-arms over the mandate because of the extra cost associated with the ELD’s, the to-the-minute logging, as well as the additional information many feel should be kept privately within the company.
The old system used pen and paper, so it was less intrusive and more flexible. Trucking industry executives now fear that requiring ELDs is just the first step in forcing companies to surrender data that they believe is private information, such as individual driving habits. Many are already being asked to deliver such information to their insurance companies voluntarily in exchange for small financial incentives or discounts.
Those in the insurance industry have a different view. We believe that detailed electronic data will someday make it easier for companies to control their insurance costs – not harder. Currently, rates are calculated as averages of drivers in a particular industry or geographic area based on their past history. Someday in the not-too-distant future, however, insurance companies will be able to rely on detailed ELD information to underwrite policies based on a business’ actual track record. They will be able to look at historical rates to evaluate, say, where the trucks have been driven, what type of loads have they carried and how good their driving habits have been.
Under the best-case scenario, trucking companies will be able to implement safety, training and hiring programs to improve their driving profile and lower their insurance rates. Companies that choose to monitor not only hours and speed, but driving styles such as braking and cornering, can identify those things and provide feedback and training. Easier driving on the trucks saves on the maintenance of the vehicle, and training on how to make the driving safer will always look favorably to the insurance carriers. That type of control wasn’t possible before the implementation of electronic tracking.
The main focus is the reliability of the ELD’s. They are expected to be tamper-proof, ensuring insurance companies that drivers are not running unlawfully. A common belief, both in the insurance industry as well as in the general public, is that a percentage of drivers are driving illegally. Illegal driving usually means driving without enough time off, or more importantly, sleep, between work hours. In these cases, they are putting the public and themselves at risk, as well as risking the financial security of the insurance carrier.
“Logbook violations occur for reasons other than long driving hours, but having driven more than 12 hours since the last main sleep, as reported by drivers, was associated with an 86% increase in crash risk, relative to less than 8 hours,” according to an Insurance Institute for Highway Safety (IIHS) report.
It’s an easy to follow roadmap. Drivers driving within the Hours of Service (HOS) rules are less fatigued. Less fatigued drivers are less likely to crash. Less crashes lead to better safety scores for the trucking company, which ultimately lends to lower insurance premiums.
The new electronic reporting also eliminates another hassle and cause for higher Safety Measurement System (SMS) scores…the actual accuracy of the logbooks. I have had clients with violations issued solely because the duplicate paper was folded underneath the original, and therefore did not copy correctly. Again, fewer violations equals lower SMS scores and a better insurance profile.
Already, just weeks after the new federal mandate to install and use ELD’s, trucking companies are seeing some benefits. Nearly 30% report a reduction in compliance violations. Compliance violations show on the Compliance, Safety, Accountability (CSA) carrier scoring reports, which heavily influence insurance underwriters in both their willingness to write an account, as well as the premium pricing they assign. In addition, nearly 20% have reported seeing improved driver and public safety. For the industry as a whole, this can only lend to less claims, lower dollar amounts being paid on those claims and therefore, lower insurance rates.
We recommend starting a conversation with your insurance agent, who may be able to use ELD data to help advocate for better rates. With the ability to track more information electronically, your broker will be ideally positioned to promote your company’s safe driving record and differentiate your capabilities from others around you.
This article was published in the Spring 2018 issue of the General Insurance Services Risk & Business Magazine. Access the full publication here.