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MOTORING REPORT – Fleet management into the future

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It’s all about that data

Research shows that technology and big data are enabling new insights into fleet management trends that would be difficult to predict otherwise. We look at what it means for the industry by Monique Verduyn

According to IBM, 90% of the world’s data was created within the last two years. That percentage will continue to grow as more devices start to collect and transmit more and more data. The Future Now report, released by Innovation Group, points to a future for fleet management which will be technology-led and most likely be heavily influenced by disruptive innovations using big data – like driverless cars and telematics. That’s according to Glen Mollink, CEO of Innovation Group.

Mollink says the report highlights a technology-driven revolution in any number of industries – and especially those in high-tech sectors like the automotive industry and logistics.

“The fleet management industry faces a massively exciting future – but one that requires immense innovation by current players if they are to compete with these ‘disruptive innovations’,” he adds.

Fleet management is an industry that stands to gain much from the application of business intelligence (BI) because, as the report states, “When driving, but especially in the case of fleet management, the vehicle cannot be separated from either its cargo or driver. In addition, it’s increasingly a package that has also become inseparable from technology, specifically its BI and analytics components.”

Andrew McLintock, an enterprise solutions architect and MD of Foxfire-BI, which consults to many large enterprises among which are owners of some of the country’s largest fleets and rental companies, says the quality of the analysed data you get out of a system is commensurate with the diversity, volume, relevance and quality of data input: the vehicle, driver behaviour, time of day and seasonal factors, billing, fuel and maintenance costs, lading, medical history, route information, and more.

“Typically, where a fleet management system has access to all this data and is integrated with enterprise resource planning (ERP) and customer relationship management (CRM) systems, it transforms from a management tool that simply monitors fleet costs into a holistic enterprise solution that integrates everything from the driver and vehicle to the public and the market. This enables the company to forge ahead with an informed and purpose-driven intent. It empowers the enterprise to unite and coordinate three of any business’s biggest assets – fleet, service and infrastructure and its human capital,” McLintock says.

In addition, South Africa is set to follow the European trend of using fleet management tools to improve driver behaviour. The report states: “Health and occupational safety organisation NOSA has a campaign to adopt the European model of safety management in driving, which is becoming a big part of fleet management.”

The challenge in this regard, as McLintock points out, is that “Drivers are the single biggest vulnerability in any fleet. Because of the [tough] work conditions, divorce and alcoholism are more prevalent among long-distance drivers than other occupation, and they have a higher incidence of HIV/Aids.”

In the report, McLintock is quoted as saying that Aarto (Administrative Adjudication of Road Traffic Offences) will also be re-enforcing this. “Aarto is not yet implemented, but it addresses the fact that until now there has been no clear accountability for company cars or trucks. Once Aarto is implemented, that accountability will reside with the company, which will be liable for any sort of traffic infringement by its employees while driving a company vehicle. In particular, under the demerit system companies will have to closely manage driver demerits because where a driver’s licence becomes suspended and he continues to drive, the company may be liable for any consequences,” says McLintock.

As for fleet managers, McLintock points out that more and more tools are at their disposal and available to assist in monitoring driver behaviour. For instance, trucks are starting to be manufactured with “breathalyser ignitions”. The driver breathes into the device both to start the vehicle and at regular intervals while driving.

McLintock says: “The technology exists to incorporate a fingerprint-based biometrics system into a vehicle’s ignition system, and even have it as a constant security device installed either in the steering wheel or gear lever so that no other person could drive it. Furthermore, such systems are affordable.” The obstacle, he says, is achieving the necessary levels of cooperation between all parties – authorities, manufacturers and fleet management companies/insurers.

TECHNOLOGY, DATA SET TO TRANSFORM INSURANCE INDUSTRY BY 2020

Another finding of the Future Now report is that in the coming decade the insurance industry will use technology as never before in all aspects of business, from signing up policyholders to administering claims.

“The South African motor insurance industry is in the midst of an exciting and fundamental change in the way in which it evaluates risk, prices policies and interacts with its customers,” says Jonathan Holden, managing executive, insurance, Innovation Group. “Technology and data are set to come together to redefine the insurer–customer relationship.”

According to the report, one of the by-products of the digital revolution has been the shift in the balance of power from industry to consumer. In the past the consumer buying experience was weighted more in favour of brands and brokers, whereas now technology is acting as a leveller. This is because, for the first time, consumers are able to research and discuss their insurance.

WHAT CAN CONSUMERS EXPECT?

Technological advances in automotive design and fleet management are likely to result in fewer accidents, and certainly fewer serious ones. The data showed that 27% of claims currently result in a total loss. This is likely to change over the next decade, with a much starker divide between minor and catastrophic claims. Insurers will need to start investing in premium care systems for more serious accidents, while ensuring they take the hassle out of minor claims such as panel damage to guarantee the claims experience is as quick and painless as possible for customers.

Education, more traffic calming in built-up areas, and on-board technology in cars is simultaneously going to bring down accident speeds, thereby reducing the number of serious collisions. This trend will only exacerbate the current shift from replace to repair, with smart repairs becoming more and more frequent.

“An equally important innovation comes with telematics, which is set to become a significant disruptor to the South African motor insurance market over the next decade and is likely to very soon impact pricing methods across the industry,” says Holden. “We’ll see the technology account for 40% or more of policies over the next ten years, but the real value will be derived from the data telematics generates.

Big data will enable insurers to redesign the insurance product while facilitating better risk selection leading to better deals for some drivers, but worse for others. The ultimate goal is a completely bespoke policy – a market of one.

The ultimate use of big data is in the customisation of policies, but Holden says few insurers in South Africa are currently doing more than toying with it. “Big data makes it easy to tailor a policy to individual circumstances, but some insurers don’t yet have the rating tools to do so or do not have the means to embed telematics across their portfolios.”

A NEW ERA OF MOTOR INSURANCE

Currently there is no agreed standard for telematics data across the industry, meaning customers cannot easily transfer their data from one insurer to another. This results in an incomplete picture of customers’ behaviour. How insurers treat their data in the future and how much value they can extract from it will come to shape their ability to remain competitive.

“The data that innovations like telematics produces is a game changer,” says Holden. “Over the next decade it is going to force insurers to engage with customers on a semi-continuous basis at the very least.”

Holden says the fragmented approach to data accessibility – between insurers, traffic authorities and vehicle manufacturers – must start to give way to a one-stop proposition in which all data relative to vehicle and driver, past and present, is accessible. One initiative in this direction is STRIDE (Short-Term Insurance Data Exchange), which aims to standardise fields of data captured and stored on insurance policies and claims according to international standards.

“This is a valuable first step in enabling insurers to evolve to the next level in which each policy is individualised and relationship-based rather than the current standardised approach.”

Beyond technology, the South African Insurance Association (SAIA) has several initiatives under the umbrella of its Sustainable Motor Strategy, aimed at making motor insurance profitable for underwriters and affordable and sustainable for consumers and business. These include lobbying for regulations permitting certified alternative parts to be used throughout the extended warranty period and looking at the entire accident value chain – from towing companies to motor body repairers and parts – to eliminate wastage and corruption. ❐

A MULTIBILLION DOLLAR INDUSTRY

A recent research report by RnR Market Research says the global fleet management industry is forecast to be worth $30,45 billion by 2018, at a compound annual growth rate (CAGR) of 22,8% from 2013 to 2018.

The growing competitiveness among the transport service providers, CO2 emission control norms, and rising fuel prices are making the fleet management system (FMS) an essential component of business operations that include fleet vehicle operators.

The report also found that the number of vehicles is increasing globally with a major boom in the emerging economies; this has a positive impact on the fleet management industry. Organisations from public transport, service sectors, logistics, and retail industries are expected to bring huge business opportunities for the fleet management vendors.

Author: Monique Verduyn