When it comes to motor insurance, heavy vehicles – with their enormous losses and complicated risks – tend to get a lot more attention than their smaller brethren.
But fleet and light commercial vehicles – a term that includes delivery vehicles, utes and small, rigid-bodied trucks – outnumber heavy trucks by more than 10 to one.
They also tend to be involved in accidents much more frequently, requiring careful risk management.
The basics of insurance in the sector are straightforward, with policies usually covering the same perils as domestic comprehensive motor wordings.
Common additions include retrieval costs, removal of debris, employee personal property and the hire of a vehicle after theft.
David Hoffman, Suncorp Commercial Insurance Chief Underwriting and Portfolio Manager says: “Many policies also come with additional or optional benefits, such as signwriting costs and excess-free windscreen repairs.”
“Many also provide a limited bodily injury gap cover, which covers the insured for personal injury that may not be covered by their CTP insurance.”
Tips for brokers
Justyn McTaggart, Principal of brokers JLM Insurance Group, says it’s essential to understand the client’s business when writing policies.
Clients have been advised to take public liability and carriers liability and have opted not to, leading to disheartening and even devastating results.
“People think vehicles are a basic type of insurance but you really need to understand the client, because there are many different elements of transport,” he says.
“It’s essential the fleet manager really understands the wording of policies so they are properly covered.”
Willis Victoria Sales Director Graham Weaver says brokers should make a habit of analysing their clients’ claims histories to identify any repetition.
“Understand your client’s operations, their seasonal demands, time sensitivity with regards to freight and what their expectations are for repairs and repairers,” he says.
“Then make sure you fully understand how the insurer claims system operates and convey that to your client.”
Mathew Lethborg, OAMPS Melbourne Commercial and Industry Branch Manager, agrees.
He says the most important thing a broker can do is understand the specific risks for each client, so they can explain any gaps.
“What we’re finding is that too many people will only take commercial motor insurance, without taking public liability and carriers liability,” he says.
We’re seeing many new and, in some Cases, less experienced drivers.
“We have seen examples of claims where clients have been advised to take public liability and carriers liability and have opted not to, leading to disheartening and even devastating results.”
Risks on the road
In a sector where so many claims are caused by human error, it is no surprise much focus in the industry is around the drivers themselves.
The boom in online shopping is fuelling an explosion in the number of delivery vehicles on the road, helping make light rigid trucks the quickest growing motor sector, with their numbers increasing by a quarter in the past five years.
“We’re seeing many new and, in some cases, less experienced drivers,” Lethborg says.
“Experienced drivers are also taking positions in other industries, such as working in the mines with the super-heavy haulers.”
“There’s a critical shortage of truck drivers, so earlier this year the Australian Trucking Association appealed to the Federal Government to make foreign drivers eligible for 457 visas to help address the issue.”
Lumley Acting National Motor Manager Rick Norrington says the increase in inexperienced drivers has increased underwriting difficulties.
“Differential experience and attitudes, insufficient training and time and financial pressures influence the profitability outcomes,” he says.
“This variety of factors can change at any time so make the possibility of a predictable outcome unlikely. The question therefore becomes whether an underwriter is prepared to take on the volatility and will the broker and client support them or will the account simply change for lowest price at any given time.”
Zurich Australia Head of Motor Khoder Chehade says good risk mitigation requires providing as much information to the underwriter as possible.
He explains that a full schedule of vehicles, claims history for the past five years and completed questionnaires are usually mandatory for underwriters to be able to quote the risk.
“Brokers also need to make sure the underwriter has a proven history in managing this product with the appropriate resources and infrastructure to service the business.”
He says one of the most significant areas in which brokers can assist clients is in understanding the total cost of risk.
“For every dollar in insurance claims, there are many other uninsured costs borne by businesses.
”For instance, uninsured costs can include absenteeism from work after an accident and lack of business continuity and performance while a vehicle is off the road.
A second risk area with which brokers can help clients is work-related driver safety culture, says Chehade.
“They should be asking insurers about training workshops and guidance that focuses on culture and driver safety awareness. Brokers should also be encouraging clients to attend industry groups that concentrate on safety,” he says.
Above all, says Suncorp’s David Hoffman, a holistic approach is the best way to reduce the risks associated with managing a motor fleet.
“It is absolutely critical that all levels of an organisation buy into risk management. Senior managers have a huge role to play here,” he says.
According to Hoffman, team leaders have the biggest influence over a driver’s behaviour.
“A lot of Vero’s risk management tools, such as our accident review form, are aimed at team leaders and drivers.
But these tools are only successful if senior management is committed.”
He says it’s also important to adopt documented roles and responsibilities for drivers, driver management procedures (including regular driver license checks), and accident review processes.
Lumley’s Rick Norrington says if brokers want to impress, they simply can’t accept the client’s status quo in claim frequency and outcomes.
Instead they must guide the customer towards a proper investment in risk management.
Doing so will do more than make your clients’ businesses more sustainable and profitable; it’ll make the broker more valued than ever.
The hands-on approach
For the past two decades, Lumley has been pioneering its benchmark approach to risk mitigation.
Lumley Acting National Motor Manager Rick Norrington says they partner with brokers and their clients to analyse motor fleet accident statistics and costs, as well as issues in the broader industry to devise the ‘best- practice’ outcome.
“We work with our clients one on one to achieve these outcomes and then are able to share these case studies as examples of what can be achieved in the ultimate goal of reducing both the frequency and cost of these incidents with a focus on driver safety,” he says.
“By allowing our insureds to see comparative data that relates to their industry segment or organisational structure, we can provide a sense of reality to their investment in risk management, even if the insured’s own experience is currently different to the average result.”