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Piece of mind and convenience is the attraction of the Association's allembracing scheme, and its directorgeneral thinks this new membership service will make the RHA indispensable to the haulier. David Wilcox reports
"THE CLOSE of 1983 has seen more changes in the Road Haulage Association in one year than at any time since 1948." That is the view of RHA chairman Harold Russett writing in this month's edition of the Association's new-look Road Way magazine.
One of those changes he refers to was the launch of the RHA's own insurance company on January 25. It is a year old this week and has already been dubbed in Road Way as "one of the Association's most successful ventures".
The arrival of RHA Insurance Services is more significant than it appears at first sight. It has two declared objectives: to provide good insurance cover at a low premium for RHA members and to increase the income of the Association.
But it is also part of a grander strategy. RHA director-general Freddie Plaskett explains: "My ultimate aim is to make the haulier feel the RHA is so valuable that he cannot affort not to be a member. Once we can attract them as members we can enforce certain standards and that is the way we are going to really raise the standing of the haulage industry. It needs a strong trade association and RHA Insurance Services is one step on the way to achieving that." When Freddie Plaskett joined the RHA as director-general in summer 1981 he was concerned about the Association's large dependence on subscription income and he sought to develop other sources of revenue. While not lessening the RHA's role as an industry spokesman and representative he recognised that the many small hauliers who were members needed some rather more tangible services.
"Talking to the members, it was insurance that kept cropping up. So I dropped word in the City that the RHA was wanting to enter the insurance market and almost immediately we had five big international insurance brokers interested and we started negotiations."
For many years before this the RHA had operated an accredited broker system which, admitted Freddie Plaskett, amounted to no system at all. There was a panel of about 20 insurance brokers to whom members were referred; some had a formal agreement with the RHA, some did not. Each broker decided how much commission to pay the RHA for the referral of members and the RHA trusted each broker to make the appropriate payment. The system was loose and Freddie Plaskett described the Association's revenue from this as "miniscule".
As a result of negotiations with the five big international brokers during late 1982 the RHA decided to go into business with Bain Dawes, the third largest broker in the UK. This company had been one of the accredited brokers for the RHA in the West Midlands and had proved to be one of the better ones in the area.
In addition to this Bain Dawes had offered an attractive financial deal for the RHA on the matter of division of revenue and guaranteed that the RHA income would exceed that from the accredited broker system.
So an agreement betweeen the RHA and Bain Dawes was signed last January, establishing RHA Insurance Services as a separate company jointly owned by both organisations and with a board of directors drawn from each.
Managing director is Brian Johnson from Bain Dawes: "We looked long and hard at the RHA's proposal. We were aware that the road transport industry does not have the best image, but the RHA assured us that it was working hard to improve this and that the RHA involvement assured us of a certain standard of operator."
The people who run RHA Insurance Services on a day-today basis are still Bain Dawes employees but they handle nothing but RHA business. They total 50-60 people spread throughout 18 offices, three of which were added this year at the request of the RHA to match the membership's distribution.
After a year in business both parties are pleased with arrangement. Neither would quantify the success but RHA Insurance Services has already met its objective of increasing the RHA's income and in its first year the income has exceeded that from the accredited brokers in an average year.
I asked managing director Brian Johnson how it meets its other objective of giving RHA members better insurance cover for a lower premium. Only RE-LA members can insure through the company.
Motor insurance and employers' liability insurance are compulsory for every haulier but Brian Johnson explained that the prudent haulier will voluntarily choose to have insurance cover for almost every other aspect of his operation — he listed no fewer than 17 possible separate policies that could be applicable to a haulier.
Most hauliers will have at least half a dozen policies — motor insurance, employers' liability, property insurance for the depot, depot contents, goods in transit and continental travel (green card).
Each of these policies will probably be due for renewal on a different date and the haulier has the job of remembering to pay the premiums when they fall due. What the RHA Insurance Services' Roadway policy does is to include all the policies — the main ones and the more unusual ones — into one package with just one premium to pay. "We give the haulier peace of mind and convenience," said Brian Johnson. "There is no chance of him having inadequate cover or forgetting to renew a policy because they all included in the Roadway package."
One premium to cover all the policies is certainly convenient but would add up to a hefty bill and so RHA Insurance Services has included the option of monthly payments.
As a broker RHA Insurance Services had to place the policy with the insurance company (or companies) that gave the best deal — there are around 50-60 insurance companies that offer commercial vehicle insurance. The majority of the Roadway policy is placed with Sun Alliance and Excess Insurance companies.
A third company, Bishopsgate, is also used because it gives a particularly good deal for owner/drivers' insureance on a small hauliers' policy and for foreign travel. The Prudential was added to the list this month to give a wider choice.
Although the Roadway package includes many different policies the RHA member looking for insurance does not have to take the whole package but instead can opt and pay for just the policies he needs.
Brian Johnson said that so far most have chosen the entire package and so have got more cover than they had under their previous policies.
This partially meets the RHA's declared objective of extending the scope of its members' insurance cover. But has this been matched by a reduction in members' premiums?
Brian Johnson claimed that RHA Insurance quotes are typically 20 per cent lower than competitiors' comparable quotes. With two other insurance companies chosen at random (by me) this was tested with quotes for motor insurance on a 32 ton gvw general haulage artic based in Birmingham and owned by a small haulier.
Gross premiums (ie without a no-claims bonus) quoted by the two other nationally-known insurance companies were £1,348 and e1,295. With RHA Insurance Services it was £1,043, representing a saving of 23 per cent and 19 per cent on the other two companies.
It is also claimed by Brian Johnson that the arrival of RHA Insurance Services has had a significant impact on the whole commercial vehicle and haulage insurance market. Hauliers have been getting quotes from RHA Insurance Services and using them to negotiate a lower premium from their own brokers. Brian Johnson admits that many brokers have responded to the challenge and cut premiums but he wonders how long they will be able to continue to do so.
When structuring the Roadway policy the RHA asked Bain Dawes to give particular attention to the needs of the small haulier and owner/driver. The special small hauliers' policy with the Bishopsgate is one example of this. Another is an introductory deal for new owner/drivers who can prove an accident-free driving record for at least two years with their previous employers. They immediately qualify for a 20 per cent no-claims bonus.
It is most important for the RHA that the Roadway quote is significantly cheaper than the competition because at the time of the launch Freddie Plaskett publicly stated that he expected many hauliers to join the RHA simply to take advantage of the insurance. Therefore the savings must excede the cost of RHA subscriptions.
This month he told me that the insurance has been instrumental in levelling-out the fall in RHA membership. Growth in the insurance business during its first year has been promising and Bain Dawes has told the RHA that it confidently expects to retain 80 per cent of a year's new members, to be joined by the new clients.
Commented Freddie Plaskett: "The haulage industry is intensly conservative with a small 'c'. Members will not change overnight but if it can be proved that RHA Insurance Services can save them money then they will take advantage of it."
He believes that they will be joining in greater numbers in this, the second, year. "Many still have some time left on their existing policies and will wait until the renewal date. And I think some of the larger members have waited until RHA Insurance Services has settled down. We have now proved we are not just a flash in the pan."
He pointed out that members who do not want to part company with their existing insurance broker can still take out a Roadway policy but will have to pay slightly extra for their loyalty in diverting business via their broker.
Brian Johnson told me that RHA Insurance Services "has learnt a heck of a lot" in its first year and during this time has added some new features to the policy.
One which he described as a "bolt-on" extra (ie available at additional cost) is loss of use cover. If a vehicle is damaged and off the road so that there is a resultant loss of income this can now be covered by a policy. This is not unique to RHA Insurance Services but is most unusual.
When the Roadway policy was launched last year it included as standard "reinstatement cover". This meant that if a lorry less than a year old was damaged beyond economical repair the policy cover provides for a brand in particular need to offer liability beyond the customary £800 per tonne.
There are several other areas in which RHA Insurance Services have removed the conventional limitations. For instance, if a container is lost or damaged most policies limit liability for the container itself to £3,500 or less. Although this would usually be adequate it may not be for a sophisticated insulated/its Roadway package but has reduced the number of exclusions and limitations to liability, particularly on goods in transit insurance.
It is apt that the goods in transit cover should be particularly thorough since it provides protection for the haulier who has in turn accepted liability under the often-quoted RHA conditions of carriage.
But with less spot-hire work and far more long-term contracts, many hauliers' customers are looking more closely at hauliers' liability levels in the conditions of carriage. For sound commercial reasons an increasing number are wanting "all risks" liability acceptance, so the haulier who wants to offer his customer this peace of mind needs corresponding insurance cover.
Air freight and parcels carriers new lorry rather than just the market value of the old one. This innovation has now been extended and for an additional premium members can have "new for old" for vehicles up to five years of age.
In its efforts to provide greater insurance cover for members RHA Insurance Services not only incorporates more policies into refrigerated example and so the Roadway policy has no limit.
Similarly, most policies limit liability for damage to a vehicle's sheets or ropes to £300; this may not be enough for a set of new sheets and so RHA Insurance Services imposes no limit.
A common exclusion in most theft cover policies is for vehicles or trailers left unattended unless they are parked in a depot or secure yard; unattended vehicles/trailers left in lay-bys, on waste ground or at the roadside are not covered by most policies. The Roadway policy, however, does not contain this exclusion.
Brian Johnson was at pains to point out that a haulier can negotiate with his broker to get all these matters covered by insurance under any policy, but it is up to the haulier to ask specifically for the extra cover and to pay an additional premium. "That's why we say that our policy is tailor-made for the haulier — he doesn't have to ask or pay extra for this cover."
Another unusual feature provided by RHA Insurance Services for its goods in transit cover is a 24-hour emergency claim service. If a load is damaged — perhaps in a road accident — the driver or operator has telephone contact night and day in the UK and Europe with a company of loss adjustors/surveyors.
During its first year RHA Insurance Services has also introduced life assurance, a pension scheme and private medical health cover. Like the company's Roadway and small hauliers' policies, these are open only to RHA members. Already profitable, if RHA Insurance Services is going to blossom into a moneyspinner for the RHA would it not make sense to take full advantage of it and allow non-members to use the service?
Definitely not, said Freddie Plaskett. "The aim is not make money per se. It is a means to an end and the end is to increase the standing of the RHA. The development of membership services like insurance is part of this and there are others in the pipeline."
After a year's operation only very minor adjustments have been made to the agreement between the RHA and Bain Dawes. Said Freddie Plaskett: "Both parties were very enthusiastic that the arrangement continues. I am confident that RHA Insurance Services has a bright future."