Risk mitigation rewards for transport clients
As one of Australia’s leading specialist Commercial Motor insurers, Lumley Insurance has noticed an increasing frequency of heavy truck crashes and associated claims – an increase of 60% severity in the last 6 month period.
This increasing incidence looks likely to impact the overly competitive insurance market conditions that the Australian transport industry has enjoyed for quite some time.
Should the current frequency and severity of losses, which appear to be partially caused by tougher underlying economic conditions, become the norm, some transport operators experiencing excessive incidents requiring insurance claims lodgement may find it difficult to purchase sustainably priced insurance.
It is inevitable that transport risk and insurance premiums are dependent on each other. Specifically in the last six months we have noticed a definitive change in probability of loss. Previously risks which have been residing in a category of low probability of loss (low risk) have enjoyed low premiums. But not anymore, it appears risk has changed dynamics - and the change has been extreme, much like the weather and economic events experienced of late.
If you have clients in this segment, there are steps they can take to mitigate their insurance risks and help them achieve a sustainable insurance premium. These include:
-
conducting driver recruitment checks and providing appropriate inductions
-
using technology to monitor road risks (e.g. GPS tracking, in-vehicle cameras etc.)
-
ensuring drivers are suitably matched to the vehicle configuration, route, freight task and required maintenance basics
-
enlisting the services of qualified trades people to conduct maintenance work on trucks and double-checking their work before placing a vehicle into service
-
entering into contracts with reasonable payment terms and profits to ensure your business’ long-term sustainability
-
accessing current financial information to enable early decision-making
-
monitoring your business’ operational and financial risks
-
implementing effective Occupational Health & Safety (OHS) systems, training and procedures
-
providing formal and informal ongoing training to all drivers
-
understanding what is expected from your insurance policy; they are all different!
National Heavy Motor Manager, John Bottomley says “that while risk reduction is not a simple process, being able to demonstrate that all key risks identified are either acceptable, or being addressed via a succinct risk treatment process is essential. Done properly and clearly articulated to an insurer, a risk mitigation program can considerably improve a transport industry client’s insurability and premiums.”
“The transport industry is fraught with risk and is a difficult industry segment to predict,” says John. “After manufacturing and construction, it’s also the third most dangerous industry for serious injuries and fatalities.1
“With changing industry dynamics now beginning to place significant upward pressure on both Transport and Insurance industry profits, any efforts invested in covering all the risk bases will be beneficial. But you also need to actively demonstrate and articulate these actions to your financiers and insurer or else the financial benefits could be lost.”
1 Compendium of Workers Compensation Statistics Australia 06-07, March 2009