By Andrew Bradley, eDriving’s Risk Management Guru
As many of you may be aware the insurance market is cyclical and we are currently in the middle of what is termed as a “hard market”, which means increased premiums and less capacity. Typically, hard markets last three years before they begin to soften. However, market cycles have been lasting longer in recent years. I will not go into reasons for the cycles but concentrate on what you can do to mitigate the impact on your motor insurance:
- Have fewer losses /crashes. Loss prevention is key irrespective of whether there is a hard or soft insurance It is beneficial to implement a safe driving culture within your organisation and aim to extend this philosophy to employees’ families and your supply chain. Reducing the frequency and potentially the size of losses will help your organisation reduce not only death and injury, but also costs. If your company has a successful road safety programme in place which is properly presented to the insurance market, you should be ahead of the game.
- Own Damage. Do you need to fully insure your Own Damage? Depending on the financial strength of your company and its view on retaining risk, you may wish to analyse whether eliminating the Own Damage cover makes sense or limit it to Total Loss only, thereby reducing overall premium costs. Remember to take into account the potential accumulation risk of multiple vehicles being damaged in the same location e.g., due to fire, hail, windstorm, tornado, etc. You should also consider there are often additional charges to your standard insurance premiums depending on the country i.e., premium taxes and other surcharges which can add up to over 15% or more, therefore, the lower the premiums the lower the additional charges.
- Deductibles. Review existing deductibles on both own damage and liability to evaluate if increasing them will make any premium reductions worthwhile.
- Captives. Many large companies have an in-house captive insurance company in order to insure a basket of risks within an internal financial structure. However, not every company includes their motor fleet exposure within their captive. It may be worth revisiting this in view of motor rates in the current market especially if you have a successful road safety program in place.
A captive could allow you to fund Loss Prevention programmes centrally rather than locally.
- Changing the fleet profile. Rather than providing vehicles to employees, you may wish to analyse the merits of employees using their own vehicles, while providing an indemnity for company usage. Typically, this would avoid the company financing crashes outside of work time and limit company exposure to some extent. However, the company will need to manage the “grey fleet” aspect i.e., monitoring of insurance limits purchased by employees, maintenance, etc. Since there is still a large liability exposure, you should apply the same safety approach to both company drivers and drivers of privately-owned vehicles used for company business.
- Leased vehicles. Leasing companies can offer a “one stop shop” for all your vehicle needs, including insurance. Nevertheless, it would be best practice to request the leasing company to provide a breakdown of the insurance costs and insurer(s) used, together with detailed claims reporting. The insurance cost should be independently benchmarked from time to time. Understanding these costs is important when you are assessing the effect your fleet management progamme is having on the insurance charges as in the next item.
- Make your case to insurers. If your loss prevention programme has been successful or if you have been making progress based on quantifiable benchmarks, highlight this in insurance submissions, benchmark your results to prove that you are better than the average, mention any road safety awards received, highlight positive changes in the fleet mix including more modern vehicles with greater use of technology, lower driver turnover, etc. If your actions in road safety are included in your company’s annual Sustainability Report e.g., Dow Jones Sustainability Indices or FTSE4GOOD for environmental, social, governance, also mention this in your submission.
- Communication and engagement. Communicating internally and externally the impact of crashes and the benefits of a safe driving programme are essential. Ensure that drivers are fully aware that even minor collisions impact the company’s bottom line and that not all incidents may be insured, consider quantifying these losses in terms of goods or services sold needed to offset any losses. The positive results of the safe driving approach should be communicated to employees, management and clients or potential clients. Encourage the company to participate in external Road Safety Awards to positively reinforce the message.
Engage with your insurer and broker, inform them of the positive measures undertaken. Some insurers may even offer a bursary to contribute to loss prevention costs. Treat insurers as your partner.
Start any motor insurance analysis several months before renewal to review data and options with your risk/insurance department, brokers and insurers. Benchmark your losses per mile/km driven and highlight the benefits of your loss prevention programme in order to position your company’s insurances with brokers and insurers.
In the event of a crash multiple insurances may be triggered, not only the motor own damage and liability but also work injury, medical, accident, life, pension, transportation etc., the important aspect to keep in mind is that insurance has never prevented a loss and loss prevention is key.
About Andrew Bradley
Andrew Bradley recently retired as Head of Group Risk Services for Nestlé and as CEO of Intercona Re, the Group’s reinsurance captive, after 40 years. In this role he implemented global insurance programs for the Group and expanded the reinsurance captive’s premium volume sevenfold.
As a Risk Management Consultant, Andrew now provides support to eDriving, where his first-hand experience is invaluable in helping eDriving further augment its client services and offerings.