Defaults on insurance premiums are higher than anticipated,” he observes when asked to comment on the outlook for commercial vehicle insurance. “Insurers, eager to write business, are making the market very competitive although it has not reached “rate war” status as insurers are cautious not to over expose themselves to undesirable risks at uneconomical premiums.

Halliwell says customer demands have shifted to the enhancement of their cash flow which has put a lot of focus on, among other things, fast tracking claims and minimising downtime, negotiating affordable premiums and excess structures and implementing risk management tools to minimise accidents and hijackings and expecting reward if their insurance loss ratios improve.

“Insurers in general have reacted positively in improving their service and product offering and depending on risk prevention measures, competitive terms can be negotiated,” he says.

Halliwell advises fleet operators that, in choosing the best insurer for your fleet, you start by selecting a specialist commercial vehicle broker to conduct a thorough and comprehensive needs analysis and risk evaluation of your fleet. This will determine the risk exposure with regards to a number of crucial issues including:

• Loss or damage to your assets.

• Exposure to third parties and other liabilities.

• Spillage, clean-up and environmental pollution.

• Cargo protection and subcontracting thereof.

• Cash flow protection.

• Accident and hijack management.

“In most instances,” Halliwell says, “more than one insurer will be used and in a well planned and structured portfolio, up to four insurers may share the collective risk.”

Continuing, Halliwell says insurance companies are statistics driven, meaning they measure each month’s results in terms of gross premiums received, against nett claims paid. To minimise their losses, insurers have various options and actions which they can implement, for example:

• Increase premiums and/or excess structures.

• Impose penalty excesses.

• Insist on improved loss prevention measures like satellite tracking, driver training, speed limitations.

• Cancel policies of poor performing accounts.

• Manage their claim cost (cost of repairs) as best they can.

• Differentiate between low risk and high risk commodities and rate accordingly.

• Arrange re-insurance on their exposure in order to cap their liabilities.

According to Halliwell, common problems insurers encounter with trucking clients in the present economic climate vary from the payment of premiums to the breach of policy conditions and the lack of risk management. This does obviously not apply to all transport companies, as many are managed in a professional and effective manner.

Halliwell says all insurance policies have clear and strict conditions pertaining to the road traffic act. The most common problems flowing from these conditions are repudiated claims due to unroadworthy vehicles, drivers who are not legally licensed and other issues such as overloading, vehicle registrations and so on.

Tom Halliwell, CEO of Libra Insurance Brokers, emphasises that proper risk management is the key to a well managed fleet.

Halliwell emphasises that proper risk management is the key to a well managed fleet. “Insurers will underwrite a policy based on the facts and information presented to them by the broker and his client. This includes details about the fleet owner’s risk profile and risk prevention measures. Halliwell says losses occur due to the failure of fleet owners to enforce these measures, and although they might not be specific policy conditions, they are material to the policy contract and these claims are then at risk of being repudiated.

“The financial crisis has forced the insurance market to get a better understanding of the needs of  transport companies,” Halliwell comments. “The most important shift is the fact that insurers are more prepared to acknowledge sound risk management on the part of the transport contractor and reward him in the form of profit shares. These profit shares can be offered in various forms such as deposit premiums, 50/50 retained funds, premium paybacks, risk finance and the like. Good incentives are available to transport contractors who are serious about risk management.”

Further to this, Halliwell says that due to the ever expanding transport frontier into Africa, insurers quickly adapted and their policy wordings and geographical limits are keeping up with the transporters' needs. Countries in Africa that were excluded not too long ago are now included in their cover.

Halliwell explains that claim service is, in general, of a good standard and the aim is ultimately to reduce downtime to the minimum. He says insurance brokers have taken the initiative to arrange road shows where issues of mutual interest are discussed. These topics include anti-hijack presentations, new management tools and equipment, the definition, implementation and value of risk management, driver training and evaluation and insurance product discussion.