May 25, 2023
Since COVID-19, the world has been grappling with economic uncertainty, from fear surrounding the Russian & Ukrainian war to ongoing impacts of BRICS (Brazil, Russia, India, China and South Africa) and inflation, resulting in the downturn of the Western economy. Through this ever changing uncertain economic climate, it is more important than ever to ensure that your business has a resilience plan with an aim to mitigate profit loss and potential bankruptcy. With cost-cutting measures and risk reduction strategies taking center stage, companies must find innovative solutions to guarantee future operations and ensure continued profitability.
During a recession, telematics can be the difference in not only surviving, but thriving through a tough economic environment.
Despite the economic uncertainty, the telematics industry is expected to grow by a CAGR (Compound Annual Growth Rate) of nearly 20% over the next 8 years. The industry is currently valued at $75 billion USD and is expected to reach $237 billion by 2030. By leveraging the power of telematics, businesses can gain a competitive edge and ensure they stay ahead of the curve.
Preserve your assets
While it is true that assets tend to lose value over time, telematics data can be utilized to implement corrective measures that help to increase the lifespan of these assets, while also minimizing the rate of depreciation.
According to a study by CARFAX, vehicles can lose up to 20% of their value in the first year of ownership, and can decrease to 40% of their original value after five years. This means that you need to take proactive steps to preserve the value of your assets and extend their lifespan. Fortunately, the data collected from telematics can help you take corrective action and reduce the rate of depreciation.
To properly evaluate the actual worth of a vehicle, you must consider several factors such as service history, past accidents, present state, features, and technology. Telematics data can serve as an illustration of this, as it allows for monitoring of vehicle maintenance, identification of possible issues, and proactive measures to prevent breakdowns, which ultimately leads to a longer lifespan for the vehicle. By preserving the value of your assets, you are arming your business with greater financial stability while demonstrating a commitment to asset management — this proactive planning can also help increase business credibility in the eyes of stakeholders.
Decrease insurance premiums
More and more insurance companies are looking to telematics to dictate insurance premiums. The data that telematics collects allows insurance companies to reduce fraud and calculate the true risk for each vehicle based on driver behavior.
User-based insurance (UBI) is a type of insurance that calculates premiums based on the actual usage and driving behavior of the individual driver, rather than relying on broad demographic data. Telematics data allows insurance companies to offer UBI policies, which provide a more accurate assessment of risk and a fairer pricing model for individual drivers. To get started, insurers will monitor driver behavior for a certain amount of time, and after they have assessed the risk, they will provide an appropriate discount. By using the data collected by telematics to correct driver behavior such as harsh braking, phone usage, cornering, speeding and quick acceleration, you could save money on insurance premiums across your entire fleet. The average annual savings for vehicles varies from carrier to carrier, however it is estimated that each vehicle can save between 20-40% if proven to be a low risk driver.
Overall, the rise of telematics and the use of UBI policies has led to a more accurate and fair pricing model for vehicle insurance, as well as increased safety on the roads through the monitoring and correction of risky driving behaviors. By taking proactive steps to address driver behavior, you can bolster your chances of weathering a recession successfully.
Invest in technology
In times of uncertainty, it is natural for individuals and businesses alike to feel a sense of urgency to react by selling off assets, laying off employees and cutting costs. However, it is essential to adopt a more strategic approach to recession management to avoid detrimental consequences. By investing in technology that provides clear insight into your financial landscape, you can pinpoint efficiencies and optimize operations for cost savings.
Technology is advancing rapidly, and has shown massive success in providing more efficient and streamlined ways to gather information. Companies that still rely on manual methods for gathering and logging information are missing out on the massive opportunity to save on valuable labor hours. An article stated that driver wages account for 30% of a fleet’s expenses, by implementing telematics, businesses can save up to 20-30 minutes per day per driver. Going off of the average trucker salary of $62,400 USD working eight hours a day, this would equate to a savings of up to $3,874 USD per year per driver. If you have one hundred drivers, this would equate to savings of up to $387,400 USD per year.
In addition to labor savings, telematics allows you to deep dive into the financial structure of your fleet and identify funds that can be saved, eliminated or stretched further. Potential areas for reducing costs include fuel consumption, maintenance expense and minimizing accidents. Utilizing telematics to gather and store data eliminates the risk for human error and improves your bottom line through increased efficiency and reduced administrative overheads. This data can ensure you are making the best decision for your business and give you the ability to fully understand the trends that are happening within your organization.
Don’t wait until it’s too late
According to an article written by Bain & Company, companies who proactively prepared for a recession before its onset were more likely to emerge from it in a better position than those that did not. Waiting until the damage has already been done may result in a significant profit loss and even threaten your company’s survival.
Navigating through a recession is not an easy feat, but it is easier to mitigate risks by being proactive rather than reactive. Having the proper technology in place to truly understand your fleet costs and efficiency is a crucial factor in treading economic uncertainty. Although implementing a telematics system requires an initial investment, it is a wise business move that can yield significant long term savings with the benefits of improved operational efficiency, increased productivity and reduced operation costs. In an article written by G2, it was shown that 35% of government fleets saw a ROI in less than 6 months after implementing telematics and 31% saw an ROI in 1+ years. These reduced expenses will more than offset and justify the original investment and can position your organization for success even in the face of adversity.