Over the past decade, commercial motor insurers and fleet managers have been utilising telematics technology, with a heavy emphasis on improving risk management solutions and streamlining the claims process. However, following the outbreak of COVID-19, insurtechs have increasingly targeted the commercial motor insurance landscape, offering usage-based insurance (UBI) policies for fleets.
According to GlobalData’s UK Top 20 General Insurance Competitor Analytics, RSA, Allianz, and Aviva made up over a third of the UK commercial market (36.3%) in 2019. Of the top three, RSA offers one of the most comprehensive fleet telematics offerings, having launched Smart Fleet in 2015.
However, up to Q2 2021, none of these leading insurers have created commercial motor insurance products that financially reward businesses for ‘good’ driving habits or went so far as to give businesses discounts based on how their fleets are used. In contrast, commercial motor premiums have been heavily characterized by a flat annual fee.
Before the outbreak of the virus, Zego and Cuvva were the only two providers in the UK with a focus on short-term commercial motor insurance coverage. These products were targeting gig workers or short-term vehicle rentals.
However, the virus has impacted businesses and their supply chains differently. Some businesses experienced an increase in demand for goods and services, while others experienced a temporary decline in commercial vehicle usage. The impact of the pandemic ultimately created a demand in the market for flexible commercial insurance services.
Additionally, with the virus creating further economic implications, there has been an increased need for businesses to save money.
In May 2020, insurtech Zego launched UBI coverage for fleets ranging in sizes of 20–200 vehicles. Fellow insurtech Flock, a commercial drone insurance specialist, followed Zego’s move and launched connected commercial fleet insurance in November 2020. Both Zego’s and Flock’s products have been well received in the market throughout 2021. Zego became the UK’s first unicorn insurtech, while Flock’s connected insurance was selected by luxury vehicle renter the Out as its designated insurance partner.
The trend of UBI products in commercial lines is also spreading outside of the UK. In April 2021, US insurer Farmers launched a new UBI commercial motor insurance programme called FairMile.
Incumbent commercial motor insurers will need to catch up with the rapidly changing market trend, especially as insurtechs challenge the market space with and without usage-based. The shift in the market means that telematics will no longer be viewed as a tool for businesses and insurers to mitigate their risk but rather as a tool that will also influence premiums prices. Insurers who don’t integrate these services risk falling behind on two fronts: firstly, on attracting clients, and secondly, in being able to capitalise on driving behaviour data, which is becoming increasingly valuable for learning how to price premiums.