Insurers will reap great benefits from telematics, but fleet drivers feel threatened. David Faithful explains the implications of big brother in the cab

IN january this year, Norwich Union (NU) announced it would be piloting a telematics system. The system, to be installed next year in 7,000 private cars, will gather information about drivers and the journeys they undertake. From this profile NU claims it will assess the risk and set a more accurate premium.

While initially aimed at private motorists, the greater impact of telematics will be on fleet drivers. Their future employment prospects may depend on the data gathered by their employers.

Already, fleet drivers have "black boxes" or data recorders installed within their vehicles. But these are currently confined to three functions - accident data recording, positional data via global positioning (GPS) and engine management data. Telematics takes monitoring a stage further.

Fleet managers can use the data retrieved from such systems to keep a closer check on their drivers' activities. For example, they can record if a driver has exceeded speed limits, varied from a designated route or driven the vehicle in an aggressive manner, using harsh acceleration or braking.

In the US, where such systems are now widely used, one rental company has taken to fining hire-car users where the system records that the vehicle has exceeded the speed limit during its journey.

There is no doubt that, from a safety point of view, such systems do have benefits. The whereabouts of a broken-down vehicle or an unwell driver can be pinpointed accurately by GPS, allowing rapid assistance to the driver.

Similarly, risk managers and underwriters, who previously have had access only to historic accident data, may be able to gain almost instantaneous access to data on how vehicles are being driven.

NU head of telematics Robert Ledger says: "We would collect data from a car every week or month, depending on the arrangement.

"This would then be downloaded to a secure NU computer, where special software would be used for analysis."

The information gathered will allow many risks to be reassessed leading to increasing number of insureds who are identified as low risk paying less for their motor insurance. And higher risk drivers will naturally end up paying more.

But from an employee's point of view, premium cost is not a major concern. It is the ability of such systems to monitor his whereabouts at all times, including evenings and weekends. Liberty is threatened.

Insurers and their contractors must be careful in handling the data. Legal issues arise as a result of storage of the collected data and the provision of data to fleets and third parties, such as insurers, risk managers and the police.

There are also legal implications over the accuracy of the data and the use of that data to dismiss or punish an employee.

The spectre of Article 8 of the Human Rights Act [1998] protecting the rights of individuals looms large in this area.

Protecting rights
Assuming that the Data Protection Act [1998] has been complied with, the operators of telematic systems provide computer-generated data to employers. Here the law of contract, common law of negligence and Article 8 protecting the rights of individuals may apply.

In the event that information is being provided to an employer, there is a common law duty of care to ensure that the information is accurate. Any ambiguity will weigh heavily against the provider of such information, resulting in a claim for negligence or breach of contract, if the employer acts upon the information and a claim by its driver results in a financial loss.

Article 8 has not yet been applied to a workplace and may arguably not apply to private employers at all. What is certain, however, is that Article 8 will be used by courts in construing employment disputes. The most likely area of contention arises from providing telematic information about a driver's activities.

The provision of information to third parties is currently an extremely grey area. The thorny issue is whether the police are entitled to gain access to the data, if they suspect that the driver may have committed an offence.

There can be no doubt that telematics is a technological development, which will have considerable benefits. But the introduction of such systems without thought of the legal ramifications could quickly bring such systems into disrepute.

Since January, what has become clear is that in order to unlock the benefits telematics systems provide and to achieve market penetration, the industry needs a voluntary code of practice on data use and confidentiality. This will go a long way to dispelling the current big brother image of telematics.

David Faithful is an insurance partner at Amery Parkes Solicitors

Companies that download telematic data will be using a computer to store the information.

The storage of this data is governed by the Data Protection Act [1998], as it will be a simple task to identify the driver of the vehicle concerned.

Certain data is regarded as "sensitive data" by the Act. This would include the commission or alleged commission of an offence. In the case of a fleet driver this is likely to be speeding.

The Information Commission is concerned over the ability to locate employees outside working hours. This issue has been addressed in a commission employment code of practice, which recommends that an off switch be fitted to the device so as to restrict employer's access to the data when the employee has ceased working for the day.

In all cases the employer must show that the data provision is necessary for the performance of the contract of employment.

In cases of use of sensitive data, the explicit consent of the driver must be obtained, as other statutory exclusions will not apply to driving activities.