Good drivers are scarce and regulations are tightening up. Joe Freebody, of Crowe Insurance Group, tells how brokers and insurers can work together to improve the future of motor fleet operators....
The reality of the moment for any operator of motor vehicles is that insurance premiums and other vehicle operating costs are rising, good drivers are a diminishing breed and the law is getting tougher.
Insurance, at the end of the day is a service industry. Both insurers and brokers need to grasp this realism and work more closely together to help their fleet clients resolve their operating cost issues. We need to deliver effective real added-value solutions, an absolute necessity in the eyes of the client.
You may recall that on December 10, 1999, two company directors received suspended prison sentences when one of their drivers fell asleep at the wheel. The charges were not related to corporate manslaughter, but to the director's primary responsibility to ensure safe working practices and effective controls (with the emphasis on effective).
This decision applies to any vehicle operator. 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.
Emphasis on responsibility
The law on corporate manslaughter is changing. Health and safety laws will tighten, particularly in relation to the drivers of company vehicles. The government and its regulators are placing an increasing emphasis on the individual responsibilities of directors and senior managers for the safe conduct of their businesses, with prison sentences being a real possibility.
Many operators, however, still believe that the practice of risk management does not or cannot apply to them:
Have you ever said any of the above, or do you know a client that has? What did you do?
We all know of profitable companies. Profitable companies tend to be well run and have a lower total cost of risk than unprofitable companies, which tend not to be as well managed. Unsurprisingly, good business management practices are the key to effective risk management.
It is as simple as that. If we manage the business better, this will lower our cost of risk – insurance premiums, payments within the policy excess and other uninsured losses, vehicle operating costs such as fuel – and raise profits.
Brokers and insurers can help their customers reduce their risk exposure. It is not just about driver training. While this can be important, there are a number of other simple procedures and services that can be adopted with minimal outlay, but maximum effect:
There are some simple management disciplines that brokers can encourage companies to introduce that will have a marked beneficial effect, not only on their accident rates, but also on their total cost of risk. They will be rewarded for the effort that you put in. About 80% of any successful programme is about creating the right culture among staff. It's not about spending vast sums of money. It's about managing your business better. Here are some examples from a "Best Practice" model that has been successful in many operations:
Make it a boardroom issue
Work with the clients to help them to face up to the real risk issues that confront their business at board or senior management level. Make a senior person responsible for reducing accidents. Set targets and empower the nominated individual to achieve their objectives and measure performance, including that of the various divisions. Remember, splitting responsibility across directors reduces ownership and adversely affects your success.
Many companies have a person responsible for the up-keep of health and safety standards, someone handling claims, a fleet manager, trainer/driver assessor, and so on. They tend to work for different bosses with different agendas. Therefore, with the best will in the world, operators will be most effective if they adopt a more joined up and co-ordinated approach to managing risk.
Brokers should also help their clients to establish corporate expectations and tell staff what is expected. Tell them how they will be measured and how you, the insurer, the broker or the independent consultant will help them achieve their targets. Finally, tell people how they have performed and complete the continuous loop back to the boardroom.
There is a shortage of good drivers. It is not the career it once was. The workforce is transient and in some areas (London, for example) annual staff turnover can be as high as 40%. However, some companies are solving the problem through a combination of training, communication, enhancing the workplace environment and conditions. They have lower turnover, lower total cost of risk and better profitability.
With help from their brokers and insurers, many companies have found solutions to their problems, even if it has meant changing some previously sacrosanct operating practices. I suppose this is what real partnership is all about.