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The latest in a series of new taxes came into force this month with insurance premiums facing a 2.5% surcharge. How can hauliers minimise the impact of this additional and unavoidable cost?
Haauliers—and private individuals—are being forced to shoulder yet another x burden. This time it's a 2.5% tax on almost all types of non-life insurance. It came into effect on 1 October as a result of measures taken in the last Budget, and will lead to automatic increases in insurance for trucks, and insurance for goods in transit within the UK.
However, cover for goods in international transit is exempt from this levy, says HM Customs and Excise. And some types of export credit guarantee insurance are exempt too.
The Association of British Insurers (ABI) believes that future Chancellors could treat the tax in the way they treat duties on cigarettes and alcohol, and increase it periodically.
Hauliers aren't exactly delighted by the prospect. "It's a tax that came as a bit of a surprise, and I think it's rather ridiculous," says Henk Buzink, managing director of Fransen Transport in Kidderminster. "Once again, we're sitting ducks."
Stephen Hall, general manager of Bristol's 011is Group says: "I can't think that our customers will stand our passing it on to them. It's going to come straight off the bottom line."
Stewart Jenkinson, commercial motor underwriter at Lloyds syndicate Eclipse says: "We cannot avoid this tax, and we will be debiting hauliers accordingly. In effect, we're acting as the government's unpaid tax collector." Eclipse has been insuring heavy trucks since the late twenties, and expanded into the coach market in the seventies.
Jenkinson believes that the levy's impact could be mitigated if hauliers are prepared to review their insurance arrangements.
Premiums reduced
A little planning could see future premiums reduced, he suggests. The operator will still have to stump up the 2.5%, but it could be 2.5% of a lower figure. First he suggests they increase the excess they take on their vehicle insurance: "A £50 excess on a 38-tonner is a joke these days. It should be £250 at least, and possibly £500 in a well-run fleet."
John Seaton, commercial motor underwriter at Commercial Union, agrees that a £500 excess on a top-weight artic is quite reasonable. "Another way of calculating any excess is basing it on I% of the value of the truck," he adds.
Both Seaton and Jenkinson believe hauliers should not rely on insurers to fund the cost of replacement windscreens, any more than they would expect them to pay for replacement tyres. It can be more costeffective to forego screen cover and make a separate deal with one of the windscreen replacement specialists.
"If you keep claiming on your insurance, it turns into a pound-swapping exercise," Seaton says. "You end up paying whatever we've paid out back to us in the form of future premium rises."
Major fleets with several depots should consider making each depot individually he suggests. The group fleet manager should then point out to local managers that this means that the first, say, £500 of accident damage will be paid for out of their budgets if the incident is their driver's fault.
Seaton reckons that this will prompt them to monitor the behaviour of their drivers more closely.
Theft is notoriously a major cause of claims, says Norwich Union, one of the leaders in the commercial vehicle insurance market. A review of anti-theft measures is seldom a waste of time, it believes.
"Take a look at the security of your premises, and make sure that any necessary improvements are made," advises one of its leading underwriters. "Ensure that suitable security arrangements are in place for trailers that have to be left overnight, and equip your trucks with alarms, immobilisers, and tracking devices."
Such measures should also reduce the cost of goods-in-transit cover, and again, it could be wise to take increased excesses.
It could also make sense to ask the insurer to send in a risk assessment expert to conduct the review on your behalf, says Roger Thrift, deputy commercial motor manager at Eagle Star; a major rival to Norwich Union for truck business. Under a new scheme one of Eagle Star's specialists will produce an all-embracing risk report.
One area they may home in on is the use of agency drivers, says Thrift. "Firms which employ a lot of agency drivers don't always have a good claims record," he says.
All hauliers should sit down with their insurance broker at least once a year, Jenkinson recommends, and review their claims experience before premium renewal.
"And pick a broker with some experience of the transport market," Jenkinson adds. "Don't pick him because he happens to be your brother-in-law, or because you play golf with him. It's amazing the number of hauliers who are willing to deal with bucket shops."
Training drivers in defensive driving techniques to reduce accident rates is worth considering too. The Royal Society for the Prevention of Accidents (RoSPA) and the Institute of Advanced Motorists (JAM) both run truck courses.
The trouble with training is that in
subsequent months drivers can forget what they have learned, and slip back into bad old habits.
One way of ensuring this does not happen is to fit an ICS Black Box on-board computer. It has a removable, driver-specific cartridge which stores data such as journey times and speeds. The information can be downloaded to a PC which—depending on the package chosen--can permit the transport manager to spot which drivers keep having to brake heavily from high speeds, for example.
lithe driver knows that his on-the-road behaviour is being monitored in this way, he'll drive more carefully, believes ICS Black Box marketing director, John Huish: "Monitored behaviour is changed behaviour."
Eclipse's Jenkinson is a convinced supporter of ICS Black Box, and his syndicate is willing to offer hauliers who fit it a premium discount of up to 15%.
Initial premium
Landmark Insurance, which is part of global insurance giant American International Group (AIG) is guaranteeing a minimum 15% initial premium reduction on Black Box equipped trucks up to 17 tonnes GliW. The firm is now declining to insure fleets which do not have Black Box fitted to an "acceptable" number of their vehicles.
"Further reductions from Landmark based on improved claims experience are likely in future years," says Huish.
Some major fleets may be contemplating saving cash by abandoning comprehensive cover, and opting for third party, fire, and theft only, possibly backed by an uninsured loss recovery legal expenses policy.
Insurer DAS Legal Expenses believes this could be an attractive option for operators with a good accident record, and their own repair workshops. Depending on the size of fleet, savings running into thousands of pounds a year are possible, it says.
Useful additional benefits of DAS's Business Vehicle Legal Protection Policy include funding the defence of any prosecution under the road traffic laws, not to mention the legal costs of representation at an 0-licence hearing.
Further plus points include cover for the cost of vehicle-related contractual disputes— legal action against a dealer as a result of a shoddy repair job, for example—provided the sum at issue is in excess of £1,000 (L750 in Scotland). Legal fees of up to £50,000 for each claim under the policy will be met.
DAS will also arrange for a bail bond to be put up if a driver is arrested, and his truck seized, while he's abroad. The insured can gain access to a 24-hour legal advice line.
The cost of hiring a replacement vehicle of up to 7.5 tonnes gross weight in the UK in the event of an accident is provided for too. A fleet policy for ten 38-tonners operating solely in the UK on general haulage work, and with a good claims record, will cost around £750 a year, including insurance premium tax.
However, Commercial Union's John Seaton warns that operators who lease their vehicles may find that the lessor will reject thirdparty-only cover, and insist on a fully comprehensive policy.
Fransen Transport's Henk Buzink says he will be investigating whether it is legally possible to circumvent the 2.5% tax by having his trucks insured elsewhere in Europe. A Customs and Excise official said he doubted that it would be if the vehicles concerned are based in Britain.
And hauliers who shop around will find that similar taxes are in force on non-life cover in other European countries and the premiums could be higher.
"And anyway, what's classed as a competitive quote today is still 50% higher than it would have been four years ago," says Seaton.
D by Steve Banner