Home / Insight / AVL Reduces The Losses Of Fleet Owners And Insurance Companies, Do You Know How?

AVL Reduces The Losses Of Fleet Owners And Insurance Companies, Do You Know How?

According to recently published figures, the number of cars in the Kingdom amounts to 12 million, with an annual increase of 5 percent. It is believed that most of these cars are insured by one of the insurance companies, which compete for a sufficient share of this huge market.

The insurance policy is no longer a luxury. Car repair in the event of accident cost a lot.  Some insurers are trying to seduce the fleet owners by the means of discount on their insurance premiums. This, however, raised their losses to worrying levels. Some even have their permissions to sell policies revoked by SAMA, the official regulatory body. This shows how difficult it is to design an equation that combines reduced costs with secured profits.

This situation has been already seen, years ago, by major insurance companies, in the United States and Europe. Their solution was to adopt the tracking system as part of the insurance policy. The purpose of this is to have a trusted tool for identifying the use of the car and the driver’s behavior. They, accordingly, determine the value of insurance premium, especially at the annual renewal.

Currently, most of the US insurers offer discounts for AVL-equipped vehicles. The data collected by the system include vehicle usage throughout the year, including the number of hours and distances (moderate/excessive), the night driving as percent of the total (because the risk is usually greater), in addition to the obligation of the owner of preventive maintenance (periodic inspection of the engine (Brakes / wheels, etc.) and finally the driver’s commitment to safe driving rules (such as seat belt, reasonable speed, green driving, etc.).

Each of these elements contributes to increase or decrease the probability of accidents and, consequently, the cost of car repair which is paid by the insurance company. The latter, therefore, tend to reward those committed to the safety rules by the means of discount on the premium.

Why should insurance companies encourage the fleet owners to have an AVL system on their fleets?

The reason is obvious. A fleet owner investing in AVL is more committed to safe driving, and more understanding of their concerns.

1. Theft Prevention

Tracking system prevents car theft. The 24-hour monitoring of the car location reduces the chance of car theft by 70% at least. Cars equipped with AVL system can be recovered in a very short time. Unlike those lacking AVL, which in the event of theft remain out of reach for days or maybe months. Some even get lost forever. Recent figures from MOI suggest that more than 9,000 cars were stolen in 2013, out of which 4,200 were recovered. The compensations towards the non-recovered cars are estimated at SR180,000,000.

Let us now compare the case if the vehicle is equipped with AVL system. I will give two examples: 

  • Example 1: In 2014, a major transporter has told us that he lost an average of 3 trucks every year on Riyadh- Medina Highway. Sometimes only truck’s chassis was found, all the valuable parts (engine, wheels, transmission system, refrigerator, etc.) were taken away. The value of the truck with shipment exceeds two million riyals.

The man had one question to Eagle-I team:

  • Is your system capable of solving this dilemma?
  • Our team’s answer was: yes. Give us a chance to explain how.

Now it is four years since he had Eagle-I on his whole fleet. Do you imagine how many cars have been stolen in the past four years?  The Answer is: zero. Not even a single car was lost. The measures taken with the help of eagle-i have removed all the loopholes that had previously facilitated the theft of trucks. By having the AVL system, the customer has saved his money and lengthy argumentations with the insurance company over the compensations. The insurance company itself has also saved millions of Riyals in the form of compensations.

  • Example 2: A car belonging to an actual customer was stolen around 10PM. The car was carrying a shipment of highly radioactive materials which is extremely dangerous if fell in the wrong hands. The company’s GM was informed, he, in turn, called the police. But a smart young man in the office, went aside and called the technical support manager at Eagle-i and told him that there was like a “resurrection” in the company. Eagle-I officer has opened the system platform, and within minutes, told the man of the exact location of the stolen car, and that there was another company car 7 KM away.

Within minutes, the driver of the second car was contacted and directed to the stolen vehicle. Police was also informed of the location. Before midnight, the car with its shipment was safely recovered and returned back to the office.

These two examples and many others show that a smart AVL system such as eagle-i save potential losses on both the car owners and insurance companies.

For insurers, a fleet equipped with AVL system indicates a commitment by the fleet owner to safe driving and good handling of the insured assets. Therefore, it is very reasonable to offer discounts on the insurance policies of AVL-equipped vehicles.

2. Improve the driving efficiency of your fleet

Insurance companies compensate car owners towards accidents and theft. Two other elements are not, however, compensated for:

  1. Goods shipped on board the vehicle, which may exceed the value of the vehicle itself.
  2. The time of work lost between reporting of the accident or theft and the actual funding of the compensation. This period is at least two months, and often more.

During this period, the fleet owner will lose the incomes made by the car. Suppose the truck provides a monthly income of SR10,000. Being out of work means that this amount (and perhaps greater than it) is lost.

 Why are we telling this?

Considering the previous explanation, fleet owners should think of:

A) The necessary rules governing their fleets.

B) The means by which the fleet is monitored and those rules are enforced.

We know from an actual experience that a small investment in the smart monitoring of the drivers’ performance saves a lot of unnecessary expenses and headache.

In addition to the discount on the insurance policy, your cars would not be stolen, and your drivers will become more committed to preventive maintenance and safe driving rules. This greatly reduces the likelihood of accidents and the consequent losses.

For insurers, they have an obvious interest in convincing their customers to install a smart AVL system. Because, on the one hand, it saves the compensations paid toward accidents and stolen cars. On the other hand, it represents a commitment by the fleet owner to the safer handling of his fleet, which in turn, lead to reduced accidents and consequential compensatory claims.

It should be noted here that the losses incurred by the insurance companies are not limited to compensation claims, but also extend to the long times spent by its employees in processing these claims. It undoubtedly increases the operational expenses.

Would you like additional information about Eagle-i?

Call now Eng. Mohamed al Jamal, Phone +966 56 638 7859

Or email us at news@dms-ksa.com

We are here to help. 

Digital Myth Solution

About Ayesha Amjad

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