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A realistic approach to fleet insurance

This paper on insurance is really designed for transport operators who are a} satisfied with their present arrangements but desirous of keeping up to date, (b) dissatisfied with their present arrangements, (c) inexperienced on insurance, The first approach must be to consider what a transport operator needs from the insurance industry. He needs guidance and sound advice on :— (i) security, (ii) service—especially on claims.

From whom does he get the sound advice? He gets it from a qualified insurance broker and he can use one of the following:—

(a) a Lloyd's Broker, (b) a member of the Corporation of Insurance Brokers, (c) a member of the Association ofInsurance Brokers.

Care should be taken to avoid dealing with a broker who has no qualifications unless he has a first-class reputation with similar transport organizations. Enquiries among friends in the operator's own business sphere will usually produce a wholehearted recommendation of a broker; the recommendation being founded on business dealings over a period of years.

Having made the decision about the broker, one must meet him to discuss the insurance requirements. The broker must be placed in the same position as the transport operator in regard to necessary knowledge of the business and must be allowed to examine policies so as to judge the adequacy of the cover. He will also need various facts and figures about such things as accidents, claims costs, wages paid to staff, nature of goods carried, vehicles used, work done, premises occupied, etc. All this will take time and the broker must be given further time to assess the situation and make his recommendations. The whole issue must not be left until just before the renewal date of the policies or, if they are at different dates. until just before the renewal date of the motor or goods-in-transit policies which usually carry the highest premiums. Nothing is more calculated to get incorrect advice and bad cover than lastminute endeavours.

Transport operators should realize that insurance premiums are costs which are, to a great extent, within their control and if premiums are increased higher than normal, then the fault lies with the transport operator, not with the insurer. Too often insurance is treated as unimportant but something to moan about when the premium cheques have to be signed. An efficiently run business carries a far lower premium overhead than an inefficient but otherwise comparable organization.

When the broker submits his recommendations, question him particularly regarding the insurers he is proposing to use. There are very few really specialist insurers for motor and goodsin-transit covers. A country-wide branch organization with its own staff engineers experienced with commercial vehicles is a must. The specialist insurers have been established for many years.

SPECIFIC INSURANCE REQUIREMENTS

Motor Insurance

First the operator must decide whether he requires what is generally known as Comprehensive cover or Third Party Fire and Theft, or Third .Party only. There are various views, which are not necessarily dependent upon the size of the fleet. Generally it is only the larger fleets that can afford to have the reduced cover or Comprehensive cover with, shall we say, a £250 or £500 Accidental Damage excess. Such operators may have their vehicles based on two or three depots. It is possible for the operator to acquire his own staff of mechanics for overhauls, servicing or repair after accident or otherwise,

and even to have his own bodybuilding workshop. There is then no dependence on the motor trader and the operator can probably afford to carry his own risk for damage to his vehicles. However, in the case of the large retail grocer (or similar organization) it is uneconomic to bring small vehicles from all over the country to central depots for repairs after accidents or even for servicing. Accident repairs for such a fleet must be carried out immediately because of the limited number of vehicles at each depot; so here the operator needs the service of a specialist insurer, as specified earlier. With a friendly working relationship with the insurer it is often possible to agree that repairs may be commenced immediately after the accident, provided notification by telephone is given at once to the local office of the insurer. The insurer will make certain that his engineer is on the job at once.

Some managements take the view that even with their own facilities for repair, which may not, for example, cover specialized types of vehicles, it is preferable to have Comprehensive cover because this means that the insurance costs are known in advance. In addition, a department not directly associated with the business of the transport operator is avoided. Thus the management budget is on this issue more certain than otherwise. V/ith the present-day narrowness of margins it is considered essential to budget accurately.

Having decided upon the general nature of the cover, it is then desirable to check up on other points as follows:—

(a) Third party property damage limit: This should be at least £100,000 per accident and greater if possible. Operators will find that insurers are sensitive on the subject of increasing their limit too far, especially if the vehicles are big or the loads carried are dangerous. The broker will be able to obtain additional cover in another market. Charges are rather higherthan previously, due to a greater frequency of large property damage claims, which is inevitable following the growth in size of vehicles and values generally. Operators will remember the Hixon accident and subsequent inquiry.

(b) Legal liability to passengers: Even though drivers are forbidden by their employers to carry passengers on commercial type vehicles, they still do. The cover can be obtained for a small additional premium and with a large fleet would possibly be thrown in. Where the operator is carrying passengers for hire or reward he must, in accordance with the law, have unlimited passenger cover and his insurer must know that the passengers are being carried for hire or reward.

(c) Legal liability of passengers: Because of the law, it is inadvisable not to have this cover and at the most the premium per vehicle would be small. Accidents happen through passengers opening doors—even with stationary vehicles.

(d) Damage to roads, manhole covers etc, due to weight of vehicle: Cover not essential for small vehicles unless they visit private premises and might damage manhole covers or suchlike, in which case cover can be obtained easily. Heavier vehicles of 20 tons g.v.w. or more need the full cover and will probably have to pay an appreciable additional premium dependent upon the nature of the work done, the g.v.w. of the vehicles and the premises visited.

(e) Driving by unauthorized persons: It is impossible to prevent vehicles sometimes being driven by unauthorized persons. Protection should be sought in respect of any liability that falls upon the vehicle owner.

(f) Third Party Liability (or even liability within the terms of the Comprehensive Policy) for unauthorized movement of other persons' vehicles by employees: In congested areas sometimes drivers move vehicles impeding their progress. In doing so they are pursuing their employer's business. Accidents may happen and the cover can be obtained,

Goods-in-transit Insurance

This form of insurance is probably one that worries transport operators more than any other because of new regulations and customers' dissatisfaction if the job is not done well. Brokers will obtain competitive rates and cover can be either in accordance with the Conditions of Carriage such as the RHA or similar conditions for the nationalized undertakings. or what is known as "All Risks". The latter in effect means that clients can be satisfied in full regardless of liability, provided always that the nature of the goods has been disclosed and is acceptable within the policy cover. There is usually a small excess clause. The Carriage of Goods by Road Act 1965 gave effect to the convention on the contract for the international carriage of goods by road. Because of the increasing transport of goods from European countries to the U.K. and vice versa, hauliers now find that they have a contractual liability which can be as high as £3,400 per ton plus carriage charges and customs duties. Any haulier with what is known as CMR liability needs his ordinary Goods in Transit policy to be extended. Insurers must know in advance because of the high potential amounts at risk. Currently rates to cover full CMR liability range from 50/-% to 100/-% on haulage charges. Cover can be obtained in respect of lower limits than £3,400 if the goods carried are specified and the sum insured per vehicle is known to be a lower figure than £3,400 per ton. Similarly cover can be obtained against what is known as the "unwitting" carriage of goods under CMR conditions, at a reduced rate.

Fire Insurance

This is relatively simple because transport operators premises usually are not elaborate. Nevertheless, it is wise to have the insurer's surveyor look over the premises, especially if there is a paintshop or a bodybuilding section. Do not accept quotations from companies who do not want to inspect premises where these two hazards are present. Surveyors have a specialized knowledge of fire regulations and can make recommendations for safety. Heating arrangements usually need the surveyor's attention.

Burglary

Cover is needed especially where the transport operator stocks spare parts including tyres for his vehicles. Tyres need special protection and again an insurer's surveyor will assist.

Public liability

This deals with the operator's liability to the public on his premises and also away from his premises insofar as the Motor policies do not apply. It presents no difficulties, but operators should make certain that Third Party limit of indemnity is at least £100,000.

Employers' liability

An operator may have a legal responsibility to a driver or other employee for injuries (fatal or otherwise) received during the course of and arising out of the employment. Damages awarded can be high and an Employers' Liability Policy would provide a complete indemnity without financial limit. Even if there were no legal liability the cost in time and money in defending a spurious claim could be considerable. An Employers' Liability Policy provides both the financial indemnity and the expert service necessary to deal with such claims.

Money Insurance

Many customers pay by cheque but sometimes money has to be taken to the bank and every week wages will be collected from the bank. Policies can be extended to cover:—

(a) cash in safe, (b) personal accident benefits to the carrier of cash and damage to his clothing following assault, (c) National Insurance Stamps, (d) hold-ups on premises.

Plant on premises

Boilers need to be insured and air receivers, cranes or other lifting tackle need to be inspected regularly. Contracts issued by insurers can provide for this,

Personal accident and sickness

Schemes can be arranged whereby employees receive payment for accidents or sickness in respect of at least part of their net loss, i.e., the difference between weekly earnings and any amount paid under the National Insurance Scheme. This type of policy should be paid for by the transport operator as a.goodwill gesture to employees. Alternatively, he can arrange for employees to pay a proportion of the premium.

Life assurance

Group Life Schemes with contributions by the employee often arranged in conjunction with the Personal Accident cover.

Miscellaneous

If the transport operator has a workshop he will probably sometimes work on vehicles or cars belonging to business associates or friends. In case there is any faulty workmanship he needs Third Party protection against the result thereof. As a small part of his business he may set up as a Ministry Testing Station for private cars. Here again he has liabilities which can be protected fora relatively small premium.

WHAT DOES THE INSURER EXPECT FROM THE TRANSPORT OPERATOR?

The insurer expects co-operation which involves:—

(a) keeping the insurer informed of changes in his business: (b) reporting all accidents or incidents immediately. Accidents should be reported direct to the insurer and not to the broker. This saves time and time is vital in settling Third Party claims as cheaply as possible. The longer a Third Party claim remains outstanding the more it costs, especially where personal injury is involved.

If the broker needs to know about the accident because, for example, there is an excess on the policy, then the claim form can be completed in duplicate or, better still, triplicate, the original being sent to the insurer, one copy being retained by the insured and the other by the broker; (c) keeping a reasonable register or other record of accidents, more particularly so that drivers with bad accident records can be reprimanded, reduced to driving a smaller vehicle, placed on non-driving work or, if no alternative, dismissed. No driver should be dismissed out of hand after an accident. If the circumstances warrant it he should be suspended until the insurer has been consulted. (A driver who is summarily dismissed may turn hostile when his co-operation as a witness is vital); (d) good treatment of the staff. This was emphasized at the 1967 Fleet Management Conference by Mr. Trevor H. Thornton, managing director of Northern Ireland Carriers Ltd., who said that staff co-operation was essential to efficiency. And, among other things, he said that the greatest need in a road transport under taking was that management should take steps best calculated to ensure a high sense of duty and morale among its operatives. His other remarks on the signs which indicate the presence of an efficient organization can be confirmed by the writer from his contact with transport operators; (e) adequate maintenance of vehicles and regular replacement: there should be a separate record for each vehicle kept by the transport manager which records the vehicle's history in detail, more particularly, details of individual tyres; (f) checking drivers' licences regularly and giving reminders when they are due.

COMMON FAILURES ON THE PART OF TRANSPORT OPERATORS WHICH COME TO THE NOTICE OF INSURERS:—

(a) Indifferent maintenance of vehicles, often due to lack of knowledge on the part of the operator or his employees. Not so prevalent now with the plating and testing programme well on its way but still far too evident, especially with tippers.

(b) Incorrect use of semi-trailers, i.e. use of such trailers with unsuitable tractive units.

(c) Increase in the average miles per hour for specified journeys to an extent that drivers, in order to obtain what they think is a fair rest period, travel at too high a speed.

(d) Indifferent and sometimes downright careless loading of vehicles. Too many loads are falling off. In recent years there has been a considerable increase in this type of accident. Too many loads still go through the driver's cab when the vehicle stops suddenly. (e) Employment of drivers without any real check on their past record. This not only leads to accidents but also to thefts of the loads.

if) Indifference to insurers' calls for protection of valuable loads when en route.

(g) Drivers permitted to take vehicles to their homes overnight. No attempt to control the garaging of the vehicle at night when away from depot.

(h) No proper provision made in commercial vehicles for seating when vehicles used for conveying employees to sites or place of work.

WHAT CAN BE DONE TO IMPROVE THE INSURANCE RECORD

Too often operators are not sufficiently interested in safety measures—usually because of the cost. Passenger transport vehicles which are subject to a form of licensing for use have a good record. They have learned the hard way.

Unsatisfactory and unclean vehicles can lead to complaints which can affect the continuance of the licence.

Goods vehicle operators will have a similar spur in the future under the proposed licensing arrangements which are dependent upon the operator having a licensed transport manager. At the time of writing, no one really knows the qualifications expected of a transport manager but it is clear that some who hold that job now will have to acquire a great deal more knowledge to satisfy the Licensing Authority.

The Construction and Use regulations are, rightly, continually under amendment but must inevitably on some scores be behind the more forward-thinking people in the industry because the Ministry of Transport has to make sure, by prolonged testing. of the correctness of a decision.

All the more reason, therefore, why the business sector should be doing a little more forward thinking, if only to forestall or prevent laws to compel the introduction of safety measures as we have seen in USA. In the States, safety regulations for commercial vehicles are in hand. Continental countries are in advance of us in such matters as braking systems and antitheft devices. Vehicles are designed thereto cope with variations in weather.

Examples of lack of foresight are seen in;— (a) articulated vehicles which have grown in size and produce accidents of a kind not happening to rigicis. namely. "jack-knifingand "trailer swing";

(b) braking systems which are inadequate for the g.v.w, of the vehicle; sometimes found on vehicles with an engine which itself is not powerful enough to supply any braking power; (c) 32-ton-g.v.w. vehicles, particularly tankers, which require a different technique for handling from the smaller g.v. w. limit previously allowed, (d) powered steering which makes it too easy to take heavy vehicles into corners, with resultant difficulties.

The transport operator will blame his drivers or his fitters but this is not a complete answer. The fact is that with the rapid development of vehicles both for goods and passenger transport, drivers need training; that is, they must be made alive to problems likely to arise and trained to foresee and avoid them. But, first, the problems must be visualized and thought out. Manufacturers could well help here. They must discover many of the problems when they submit their prototypes to test. Models are sometimes loaned to transport operators for use for the express purpose of discovering faults. The manufacturer wants to correct mechanical faults this way but there is no good reason why he should not draw attention tothe fact that handling technique needs to be brought up to date and even offer to instruct. This is merely an extension of the job of training fitters of the main dealers when new ideas are introduced which necessitate revisions in servicing and repair procedures.

Some manufacturers are now fitting load-sensing valves as standard but this is only a beginning and it took too long to get to that state. The cry is that additions mean more money and cannot be countenanced in a competitive world. This attitude will simply bring nearer the day when the law compels all manner of safety devices.

Fortunately we now have RTITB, and operators are also appointing their own training officers. Both are going to have full-time jobs, especially if sanction is given to the raising of the g.v.w. to 44 tons.

Because of the high value of loads and CRM, operators must consider protection for their loads. This may mean such conditions as

two men travelling with a load, one of whom must always remain with it:

(ii) securely locked bodies: (iii) immobilization of vehicle for overnight garaging; (iv) overnight garaging in acceptable compound which is patrolled 24 hours a day, The Road Haulage Association has stimulated interest in an organization which is alerted immediately a vehicle is stolen and at once streets are patrolled to try to spot the vehicle. This is an excellent self-help idea. A similar organization to set up proper security in compounds in the big towns would mean more self-help.

Not forgetting what has already been said, every effort should be made to build up a good staff relationship with the management. Staff should know the objectives of the management and be encouraged to be interested so that positive criticism and suggestions come forward.

Similar efforts to establish good relationships should be made with the trade unions and the police—in fact with any organization which can help but which, if unfriendly, can be a positive hindrance.

PASSENGER VEHICLES

Little has been said about these. The National Bus Company embraces a great number of vehicles in this class, but among the coaches used for private parties either for short journeys ortours are many run by private undertakings. The market for insuring these is limited, due to a dislike of the possible passenger catastrophe but the broker will know where to go.

It is fashionable now for the coach operator to give Personal Accident cover to the passenger in the cost of the ticket. Cover of quite a substantial nature can be obtained at a modest premium per passenger.

CONTINENTAL USE

The cipods vehicle operator who sends his articulated trailer abroad needs (a) marine insurance on trailer; (b) Third Party cover when on the boat and on the foreign dock but not attached to tractive-unit—not a very big risk; (c) a commercial agreement with the Continental haulier to the effect that he will be responsible for all Third Party risks from the time he picks up the trailer until the time he returns it to the dock. Also the agreement should make him responsible for any damage to the trailer whilst in his control: (d) contingent insurance against the risks covered under point (c) above in case the Continental operator should fail to implement the agreement:

(e) G. I.T. cover to provide for C.M.R. conditions and terms. When vehicles are sent abroad then the operator needs:—

(a) his U.K. Motor and 600ds in Transit policies to be extended to cover the use abroad: (b) a "green card" for use in countries to be visited; (c) marine cover on the vehicle: (d) to have surveyed his route; (e) to train his drivers in regard to Continental regulations and traffic laws.

The standard Employers' Liability and Public Liability policies normally do not need any extension.

As I said earlier in this paper, insurance costs are largely in the control of the operator. Those who approach insurance in a systematic and businesslike way, and whose operating record shows an awareness of the need for good staff relations, trained personnel and safe working practices, will obtain cover at less overhead in premiums than an inefficient organization.