Buses and coaches provide the safest form of road travel in the UK. Over 16 million passenger journeys are made by bus and coach every day and out of those many millions of travellers each year, the number who are fatally injured while aboard barely tops double figures.
Conversely, accident frequency involving these vehicles is rising and the costs associated in dealing with the aftermath are increasing considerably. Vehicles are now becoming more expensive to buy and repair. Some luxury coaches display a dealer price tag of over £300k, and even the cost of replacing a windscreen can now run into thousands of pounds.
Over the past few years, the soft insurance market and intense competition between brokers and insurers has done little to make operators pay more than a fleeting glance at their claims history. However, this period of maintaining competitive premiums regardless of accident record is over. Risk management and claims control is now paramount.
Reduction of costs
As well as reducing insurance costs, effective bus, coach and minibus risk management offers several additional benefits, including the improvement of image and levels of service. But the biggest, and normally most unexpected, bonus is the reduction of other fleet costs such as fuel and maintenance.
Insurers and intermediaries must take a more active approach in identifying and delivering effective solutions to the insured. There has to be a close partnership with the client to accurately identify the problems and deliver the solutions, in whatever form that solution may take. The process must also be streamlined to make it more effective and focused to meet the clients needs. It is no longer appropriate for us to rely on premium movement only and limited contact regarding risk management.
Risk management for operators is an absolute essential, from both a financial and fiscal perspective. Insurance costs are rising, the burdens of taxing and operating fleets continue to grow and operators' legal responsibilities and obligations increase each month. This applies equally to the large client or the smaller fleet, which may not be able to afford a dedicated internal risk manager.
The law is also getting tougher. On December 10, 1999, two company directors received suspended prison sentences after one of their drivers fell asleep at the wheel resulting in the death of two other drivers. The charges were not related to corporate manslaughter, but on a director's primary responsibility to ensure safe working practices and effective controls, with the emphasis on effective.
Tightening the rules
This decision applies to all vehicle operators. It was not a deliberate decision to take a risk, it was merely turning a blind eye or not getting around to tightening up the procedures because there was not enough time or it was too difficult. Additionally, in November of last year the Health & Safety Executive announced its intention at the DSA's 'Safe Driving for Life Conference' to tighten up the H&S at Work Act to include vehicle driving. This will without doubt increase the onus on the operator to manage the driving risk in a more effective manner.
A shortage of good drivers is also fuelling a rise in accident frequency. Driving a bus, coach or minibus is not the career move it once was. The workforce is transient and in some areas, for example London, annual staff turnover can be as high as 40%. However, some companies are solving the problem through a mixture of training, communication, enhancing the workplace environment and improving conditions. As a result, they have a lower turnover which in turn leads to a lower cost of total risk and better profitability. They have found solutions, even if it has meant changing previously sacrosanct operating practices.
But don't just blame the drivers. Instead, try to identify the underlying problems affecting risk levels. If a problem relates to a lack of driver skill, operators are either hiring the wrong person in the first place, or their training is poor. It could be that the problem is attitudinal, not skill based. If so, the solution probably lies in how they communicate with and manage the drivers.
Overall, an operator's escalating accident frequency cannot fail to increase costs and therefore reduce profits. For example, if the resulting increase in cost is £50,000 a year, a company operating at a five percent profit margin will need to generate an extra £1m of revenue just to cover the increase in cost. What is easier – to generate this additional £1m of revenue, or to reduce costs by £50,000?
A huge opportunity
Effective risk management when applied to the individual customer and fully integrated into the day-to-day operation of a business is a huge opportunity for each member of the partnership. Brokers have a strong role to play in helping clients to establish the correct management disciplines of, among others, focused responsibility, setting clear targets understood by everybody, regular monitoring and top level support and involvement.
Eighty per cent of any successful programme has nothing to do with the individual products used in implementing the programme.
Success comes from creating the culture in which the risk management actions can flourish and be successful. Without this culture, without driver understanding, and without credible expert partners, any risk reduction initiative will fail.
Look for a broad range of solutions. Too often we rely on the sale of a single product such as in vehicle training that does not match the need and is, therefore, not as successful as a combined approach would be. The key to delivering successful solutions is innovation. Many of the steps involved in a successful risk reduction programme will not require expensive product purchases, just effort.
Persevere to succeed
It will not be an easy road for brokers to follow. Along the way you will experience many adverse comments from your customer base such as: "There's no payback on driver training" or "I'm far too busy with operational issues to talk about risk management with you". Persevere and you will succeed, not only reducing your client's costs, increasing their profits and keeping them out of the law courts, but also in building a business relationship that will span both the soft and hard rate years of the insurance cycle.
Joe Freebody is Head of Risk Management at Crowe Insurance Group. He works with brokers and operators to help deliver a Risk Reduction focussed solution to Crowe's many clients in the haulage, bus, coach and car fleet sectors.