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Only a handful of insurance companies cover road transport, suggesting

6th July 2006, Page 54
6th July 2006
Page 54
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Page 54, 6th July 2006 — Only a handful of insurance companies cover road transport, suggesting
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Which of the following most accurately describes the problem?

that most view the sector as too risky to be involved

in. Guy Sheppard

examines how operators can make themselves more attractive to insurers.

According to the Association of British Insurers, approximately 75 insurance companies provide cover for motor vehicles. Yet in the commercial vehicle sector there are no more than half a dozen serious players — and an influx of competition seems unlikely. Over the past decade, the numbers who are involved in this sector appear to have declined as the appetite for making claims against hauliers has risen.

NIG, the insurance arm of the Royal Bank of Scotland, says it will only insure vehicles over 7.5 tonnes if they do not form a predominant part of the fleet. "Haulage companies are generally regarded as high risk in view of the potential for large third-party property damage and injury claims," explains Alan Horemans,NIG's fleet business manager.

Ian Clarkson, MD of West Craven Insurance Services, agrees that insurers tend to be cautious about entering the market. "They don't want to take a pounding.A 44-tonner that runs into a car won't just scrape it. On a motorway,live or six vehicles could be involved and the claim could be £50,000 or more."

One specialist haulage insurance broker believes that lawyers offering'no win, no fee' services are partly to blame for the decline in interest from insurers."Sometimes those claims get paid even though our client is completely innocent," he reports. That causes the cost of claims to increase."

He adds that claims often arise from motorists passing trucks at roundal-muts:"The car driver tries to shoot past on the inside or the outside and the hack of the trailer hits the front of the car.The poor old lorry driver gets the blame."

In some cases, he says, owners of damaged cars will knowingly blame the wrong truck. This stems from cars that are illegally parked near roadj unctions getting scraped by turning trucks: "The lorry driver doesn't see it happen; the next morning the car owner waits to see the first lorry going round the corner, takes its name and number and then claims it was responsible for the damage."

Despite the drawbacks, even the most risky areas of haulage do not necessarily attract huge premiums. Insurance firm ()amps, which manages a hazardous goods and tanker scheme for the Zurich Insurance Group, says that when accidents do happen, the environmental costs can be enormous.

Director Adam Shefrasexplains:"Every accident is different. If a spillage occurs near a water course or drainage, it could become a nightmare. [But] if it's on the side of the road, you might come out of it relatively unscathed —as long as your driver reacts quickly to the situation and the organisation has a tested emergency response procedure in place."

He explains that insurance rates for hazardous goods can be on a par with general haulage. provided the operator adopts a pro-active approach to risk management.

"If someone is delivering 36,000 litres of acid, he's going to be a lot more alert because his life is more at risk if things go wrong. We expect companies [working with hazardous goods] lobe run much better than those in the general haulage market —and have fewer knocks and bumps."

Fleets with pride

Shefras partly attributes the higher standards of care to meeting the requirements of the ADR regulations for carrying hazardous goods, but says other factors apply as well. "It's often easy to see which companies have a wellrun operation:they have a great attitude to health and safety and risk management and they tend to be the fleets with the most pride: the wagons are modern and clean and the drivers are well presented."

Hauliers can keep premiums down when carrying high-value loads as well as high-risk ones. John Hope, general services manager of car transporter ECM (Vehicle Delivery Services) in Carlisle, says the value of the firm's loads averages £250,000 hut some could be worth up to1.1m. Yet he claims that some of ECM 's competitors fail to do one of the most obvious things to bring down premiums. "A lot of companies in our section of the industry don't promote themselves enough. Insurers like to see risk-management schemes— and in the event of something going wrong, they like procedures to be set in place to investigate what has happened and ensure it doesn't happen again.

"You can be doing all of these things, but it can come to nothing if you don't tell people."

Hike in premiums

More than three years ago, ECM suffered a serious accident due to the instability of a particular model of transporter. In certain extreme conditions, it would jack-knife and fall on its side," says Hope.Although ECM was not the only company to experience this, it faced a hike in premiums because of the resulting claim.This was avoided thanks to the company's broker convincing underwriters that corrective action had been taken to prevent such an accident happening again.

Hope argues that operators can 4I also enhance their insurance appeal by agreeing to cover a certain amount of risk themselves. "If £50,000 is to be paid out, we would cover the first £10,000. It appeals to a broader spectrum of insurers if you are self-insuring a lot of the risk.They can see that you haven't tried to pass it all on to the insurance company."

Another way of placating insurance companies is to restrict the proportion of highvalue goods on each load. Cohn McKay, MD of Kent-based Fast Forward International, III. says it has agreed a 25% limit on items prone to attracting thieves such as spirits and perfume. "We could get insurance cover for carrying a full load of this stuff— but it would be very expensive."

He points out that traffic operators need constant reminding of the firm's 25% limit because although three tonnes of spirits is permissible on a 23-tonne truck, it is well over the limit on a seven-tonner.

"It's a risk you might fall foul of," warns MeKay."We had a consignment of Armagnac come in last week that was over the 25% limit."

Liability in temperature-controlled transport can be huge and those responsible for the damage need only make a fairly routine mistake.

Rick Nugent, director of the Transfrigoroute trade association, explains that unless food has been transported at the correct temperature all the way, the customer will reject it.

"The pitfalls for insurance are phenomenal. There are numerous points at which things can go wrong. Today's prime steak is tomorrow's dog food."

He estimates that a full load of meat can have a value of up to £50,000 while a full load of cheese could top £200,000. 'And it's not just the loss of the product you have to consider. There's the loss of the sales to the retailer. so the haulier can end up being stung twice."

Nugent, who is also MD of transport consultancy ACT Control Solutions, says a proactive approach to risk management is the key to reducing claims.

He points to Carmarthenshire-based NR Evans,which has a fleet of more than 100 reefers.Two years ago, it reduced its vehicle insurance by £20,000 a year and managed to buck the market trend by preventing any rise in its goods-in-transit insurance.

Managing risk

-Competent hauliers can get premiums reduced considerably if they can demonstrate that they are doing what they say they are and reducing the number of accidents."

ACT is currently providing Evans with the Safe and Fuel Efficient Driving (SAFED) scheme, which was originally sponsored by the government. Daniel Robinson, IT manager at Evans, says:"We'd certainly be looking to show insurers that we're running this course as further evidence that we're trying to manage risk."

He adds that drivers are being made aware of the most common types of accidents suffered by the Evans fleet.These often occur when motorists try to undertake its vehicles at roundabouts as well as when its drivers change lanes on motorways."We're telling them what accidents are common in our experience— and to look out for them."

Awareness training should not necessarily be confined to driving skills, however. NorthWestemTraffic Commissioner Beverley Bell suggests that extra training for drivers on hours, working time and tacho regulations could also lead to a reduction in premiums.

She argues that all these areas are linked to driver fatigue, which heightens the risk of making mistakes and falling asleep at the wheel. If drivers fully understood the reasons for the regulations being in place and the way in which they are supposed to operate,they would be less inclined to breach them.

Bell gave a presentation about the idea to motor insurers last year. "The reaction from the insurance world was very positive in respect of our role as TCs and the suggestion of how we can reduce claims."

Clear and simple

Lindsay Guy, senior commercial motor underwriter at Norwich Union, supports Bell's suggestion— particularly in relation to working time. "The biggest challenge with the directive is its complexity] think it's very important that operators make it simple for the driver so they are aware of why it is so important."

She argues that another way the industry can be made a safer bet for insurers is by using technology more effectively. "You can use telematics data not only to improve the performance of the fleet in operational terms; you can bring back information into the business about vehicle speed and duration on the road to improve the way drivers behave."

She adds that digital tachos have a similar potential. "They make the reporting mechanisms a lot easier and slicker to use." However she points out that no amount of risk management will eradicate accidents altogether.

"Hauliers are on the road. doing business and working whatever hours the business requires. It's all down to luck.They can put as many limiters in place as they like —but accidents will still happen." •


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