By Anna Sharratt, Associate Editor
(reprinted with permission from the March 2002 issue of ci – Canadian Insurance Magazine)
Last June, a computer was stolen from a BC Rail employee’s vehicle in a Burnaby hotel parking lot.
But instead of resulting in an insurance claim, the pilfered hardware was recovered thanks to a special
The computer, in essence, called home. Alerted by its
signal, police pinpointed its location within hours and nabbed the thieves.
“Recovery of our stolen assets is extremely important
to our company,” says Lu Popek, client relations manager for BC Rail, the third-largest railway
in Canada. “This is one reason we have decided to standardize on this service.”
Indeed, tracking technology like the kind that BC Rail has
adopted is now being used to protect a variety of assets. This new wave of theft
prevention tools is capitalizing on the latest developments in high-tech, including global
satellite positioning, cellular networks and wireless connectivity, to find applications
in a growing range of industries. For insurers and risk managers, the benefits – fewer
property claims and lower payouts – are clearly starting to emerge.
Tracking devices are most popular in the auto anti-theft market. Over the past five years,
several companies have started offering products in this category and they’re
building up an impressive record – recovery rates in the 90 per cent range and millions of
dollars racked up in returned assets.
In Canada, Montreal-based Boomerang Tracking Inc. is
leading the pack, having recovered 1,420 cars and heavy vehicles valued at more than $70
million since 1999. Using a proprietary device that is hidden in a vehicle,
Boomerang’s system sends out a signal when the car or truck is reported stolen,
identifying its location so police can then take action. To date, 40 insurers have
endorsed the product, backing that up with a premium discount to clients who install the system.
Getting ready to challenge Boomerang is Richmond Hill, Ont.-based PowerLoc Technologies
Inc., which is about to officially launch its own “vehicle location device” or
VLD. The VLD combines a global positioning satellite system with a wireless modem. One
special feature is the ability to create a “geo” fence – a radius around a
vehicle that, if breached, will send a warning via the GPS system to a call centre.
Another is a personal security button that allows the user to contact emergency personnel when needed.
“There are three elements to our device within the car – there is a GPS antenna,
there is a modem, which provides the wireless connectivity back to the server, and there
is some intelligence on the device itself,” explains Jim Courtney, sales consultant
for PowerLoc. “There is high sensitivity of the need for the additional features that
we’re going to be offering.”
Although the VLD hasn’t hit the mass market yet, it is currently being used by the
trucking fleet in charge of removing debris from ground zero in New York City.
“We’re tracking the trucks used at the World Trade
Center for the disposal,” says Courtney. “In fact, it’s got a geo fence – it’s a designated route.
If a truck goes off a designated route, some law enforcement authority will come and visit them.”
The trucking industry may well be turning into another profitable area for tracking device
manufacturers. AirIQ, for one, is making inroads with its onboard computer, which relays
information to a call centre every five minutes, checking the condition of a vehicle
against a pre-programmed profile and using GPS to determine location. If there are any
deviations from the established criteria, the computer relays that information to a call
centre, which then forwards it to law enforcement authorities, repair shops or tow trucks
depending on the problem involved. It can also provide a history of the truck’s activity,
which can rule out costly litigation and potentially fraudulent claims.
Phil Meagher, who oversees the commercial transport division and business development at
Pickering, Ont.-based AirIQ, says the device is also useful in deterring trucks from crossing into areas
from which they have been restricted. This, is turn, helps protects insurers from hefty U.S. claims.
“They go out and get into an accident and you find
their truck is in Buffalo. It’s not supposed to be there,” Meagher explains.
“And of course the insurance rates are a lot different if you’re strictly looking at Ontario than
when you’re across the border and running into the larger liability of operating in the U.S.”
Meagher says that AirIQ has been in discussions with insurers about the value of its
tracking device, highlighting benefits such as reduced damage to trucks due to quick recoveries.
“I’ve gone to all major commercial transport insurers
in Canada – Markel, Lombard, CGU. Royal SunAlliance, and Zurich. [I’ve said] here’s what
the systems can do, here’s how it can reduce your risk, manage your risk and also provide a pay-back.”
He adds that if errant trucks are returned within a day or
so, claims will, of course, be lower. “If [the trucks] are returned quickly back to
the service, there’s less time that they spend at the hands of the wrong person. Presumably that means
that there’s less time that they can be damaged or returned in a state that’s not serviceable.”
Markel Insurance Company of Canada, which is based in Toronto, is one insurer that
supports auto fleet tracking devices like the one that Air IQ markets. But it doesn’t
officially give them endorsements.
Ed Knoblauch, Markel’s vice president of claims, says that because of the high theft rates
in Ontario, particularly around Toronto, truck claims are sizeable. As a result, Markel mentions tracking
devices when fleet owners want a way to address the problem.
“Our fleet safety people will advise policyholders
when there are products out there,” he says. “I think that after they see their
loads go missing, they start to get a little more serious about it.”
Knoblauch highlights the main benefit in purchasing tracking devices and systems – the
potential reduction in premiums and deductibles. At a time when the trucking industry is
facing drastic hikes in coverage, some fleet owners who have purchased tracking products
are enjoying lower rates. “It’s definitely in their best interest to look into
it,” says Knoblauch. “They save on not paying out their deductibles.”
Jerry Bokser, AirIQ’s director of marketing, cites the example of Glenn Weddel, the
co-owner and general manager of Cam-Scott Transport Ltd., a Toronto-based vehicle fleet.
According to Weddel, who uses AirIQ’s OnBoard device, the payoff is in his insurance rates.
“It lowers the insurance company’s risk and they like it,” he says. “Our rates
are not going up as fast as the rest of the industry. We are below the competition in insurance rates.”
Lower insurance rates are just one of the perks for buyers of tracking devices. But
it’s clear that insurers are also poised to benefit from the products, which reduce
claims that can take a huge chunk out of their bottom lines. As a result, while vehicle
tracking devices dominate the market, other areas are opening up, suggest that remote recovery of such
items as computers, heavy equipment and perhaps cell phones, will be equally profitable in the future.
Absolute Software certainly thinks so. The Vancouver-based company produces Computrace,
the anti-loss software that BC Rail is using to keep a tab on its computers. A warning
call goes out to a monitoring centre if a Computrace-equipped computer is hooked up at
anything but its regular connection, suggesting that it has been stolen. One of the
software’s big appeals is that it can be installed so that it’s undetectable, which
is beneficial in the case of employee theft.
“If that computer is actually stolen or lost or missing or in the hands of an
unauthorized user, we have the ability of flagging it in the database as stolen and the
next time it calls in after that, we’ll get the new location of the machine,” says
John Livingston, president and CEO of Absolute Software. The software is 95 per cent
accurate, he says, and only retails for $2 to $3 dollars.
The St. Paul’s Companies is one insurer that believes it can’t afford not to install
Computrace. Fed up with high losses due to thefts, it signed an exclusive agreement with
Absolute Software to provide the tracking firm’s products at a 20-per-cent reduction in
price to its customers. Thomas Arch, assistant vice president of global technology
underwriting at the St. Paul’s, says that with statistics indicating that 45 per cent of
the losses of small companies are computer-theft related, there was a need for quick action.
“From an insurance standpoint, obviously we needed to address this because it was a
very expensive concern for us,” he says. “The first thing we had done in this
process is address our deductibles. So that much of this risk transfer wasn’t coming back
to the St. Paul. We wanted to have a solution for [our customers] to minimize this
exposure and help control it.”
Arch says that Computrace will not only cut losses, but will eliminate other indirect
costs as well. “Companies typically lose 2 per cent to 3 per cent of their laptops
per year due to theft,” he says. “After installing this particular product,
they’ve reduced that to one half of one per cent.
“Of course it’s not just the direct cost of the
laptop, it’s all the indirect costs that go into trying to investigate thefts, the
loss of production time of employees, the costs of re-creating data and the growing concern that our
insurers have in terms of loss of trade secrets, of privacy information of customers and employees.”
Indeed, when it comes customers and employees, special tracking devices are emerging that
can better protect these most valuable of assets as well. E-911 technology, an enhanced
version of 911 emergency services, is currently making waves in the U.S. The system uses a
phone line to pinpoint the exact location of an employee in distress – not just the
corporate office he or she is in, but what smaller office within the larger office. Its
main advantage is that it doesn’t leave much to chance; files are updated continuously to
ensure that changes in employee or company locations are tracked and recorded.
Frank Redemacher, chief operating officer for RedSky Technologies Inc. of Chicago, which
markets E-911, says his product’s chief selling point is its rapid transmission of location data and the
subsequent improved response time, which minimizes danger to employees and property.
“With our solution, the information that those
emergency response officials would get would include things like what your address is,
what the phone number is, what the floor is and where within the floor you’re
located,” he explains. “To the extent that fire fighters and rescue workers can
get there quicker, they will be able to deal with the problem quicker, which means that
you probably have less damage to the facility.”
Less damage and rescued staff would certainly seem to be a boon to insurers, who forever
seek to minimize damage claims. But Redemacher says insurers aren’t really biting just
yet, adding that he suspects the system is too complex to understand for early adoption.
Like many vendors of tracking products, he feels that insurers are still in a watch-and-wait mode, sizing
up the results before they publicly support or offer discounts for the devices to their customers.
It appears they will have many products to choose from. In the works are tracking devices
that will attach to cell phones and digital devices as well as household appliances, says
CSI Wireless Inc. president Stephen Verhoeff, whose Calgary-based company produces the
proprietary tracking technology used by firms like Boomerang and Air IQ. He says that in
the wake of Sept. 11 and all the safety issues that arose following the disaster, there is
increased attention being paid to anything that can protect, monitor and recover assets.
“There’s definitely a large market for that,” says Verhoeff. “But it’s
really just started. I think there is going to come a time when most vehicles and most
commercial vehicles are going to have a tracking device on it.”