Transport insurance is a remarkably broad field that can be daunting for new brokers. Two experts in the field break it down to basics
To view any sector of insurance as a monolith would be a mistake, but that’s especially true when it comes to transport. The scope of this segment is tremendous – the risks and the insured assets are big and expensive, and the losses can be, too. While the transport sector faces many challenges, insurance products help to mitigate its financial risks and protect its assets. Accordingly, insurers need to offer flexible products and provide services that are tailored to the unique needs of their customers.
Brokers should equip themselves to educate their clients about the needs of the industry and the changes that occur, says Glenn Lambert, managing director at GT Insurance. Staying up to date is crucial – best practice is continually evolving in line with technological shifts, and recent changes to Australian law have affected transport and logistic responsibilities.
“All transport companies are different, as are transport insurance suppliers,” Lambert says. “Insurance can come at a significant cost, and cheap is not always best.”
For Nick Dendrinos, head of motor portfolio at NTI, the diversity and specialisation inherent to transport insurance have been key in keeping him so heavily involved in the industry for so long. One day you might be talking to a father-and-son short-haul operation, he says, while the next you’ll be dealing with a livestock carrier hauling a road train of stock trailers across the Northern Territory or a fuel carrier fleet running B-double tankers from Melbourne to Sydney.
“All these customers have different risk profiles,” Dendrinos says. “They require an in-depth understanding from an insurer that is specialised and also has the expertise and capability to tailor a customer-centric insurance program.”
Lambert expresses similar sentiments, emphasising that brokers need to work with an organisation that can provide the relevant service to clients, not simply write a policy that’s effective on paper.
“Ensuring the right cover and structure is in place, a fast and efficient claims process, as well as a supplier who is capable of understanding the business’s needs should be the key considerations,” he says.
“It’s not simply about paying a claim or processing a response,” Dendrinos adds. “It’s end-to-end management, from ease of lodgement to making sure the insureds and affected parties are looked after post-incident.”
The risk profile of businesses within the industry serves as an excellent example of the complex nature of the challenges that brokers must navigate. As with any other field of insurance, Lambert explains, a transport company’s risk profile determines the type of insurance program and premium price. That risk profile is dictated by a variety of factors, including the company’s track record, current safety initiatives and the nature of the transport work involved.
“Employee safety in the workplace is paramount – it gets more complicated when the workplace is the cab of a truck, bus, motor vehicle or plant and equipment,” Lambert says. “The ultimate goal is to get the driver back safely to the depot at the end of each shift.”
Certainly, technology has proven valuable in providing better data to help insurers assess risk profiles. Telematics are increasingly common; many vehicle manufacturers provide them as a standard option. In combination with emerging technologies such as Seeing Machines, there are also active initiatives to help reduce accidents.
“You can argue that cars and trucks are a lot safer than they once were, which is correct,” Dendrinos says. “The driver is better protected now than they have ever been, so claims frequency has been reducing over time.”
However, Dendrinos notes that these changes in technology haven’t always been reflected in insurance premium pricing. The severity of losses, component costs and average claims costs have all increased. There are still new risks emerging within the field, too – Dendrinos points to driver distraction as a major issue.
“The rapidly changing technological landscape has been a major change to the auto insurance industry,” he says. “Mobile phones, texting while driving and touch display audio-visual systems within vehicles have also resulted in an increase in fatalities and major collision frequency.”
There’s no doubt that the increasing level of technology makes data collection easier and driver safety a greater priority. But there are drawbacks that make it a complex situation and one that is unlikely to be resolved anytime soon.
“It’s not simply about paying a claim or processing a response. It’s end-to-end management” Nick Dendrinos, NTI
Future insurance planning
Looking ahead, Lambert expects the transport insurance market to remain relatively stable over the next 12 months. He believes ridesharing in its many forms will continue to evolve, as will more efficient pricing models based on data-driven solutions, particularly in small fleets.
“The better-managed transport companies will see the benefits of their risk management efforts, where others will see significant increases if the loss ratio is loss-making over time,” Lambert says.
However, that doesn’t mean the whole process will be smooth sailing. “Companies that are continually working on managing or reducing their operating risks – and there are many of them – are reducing their insurance spend,” Lambert says. “The move to self- insurance in its various forms is increasing.
Accordingly, insurance providers must be able to deliver a complete set of services that includes management of all claims covered under client insurance policies.”
Dendrinos believes that over the next 12 months, the industry will see much tighter enforcement of the new Chain of Responsibility legislation, potentially exposing some transport operators to big penalties.
“Suppliers will be looking at their providers much more closely to ensure that their vehicles are fit for purpose,” Dendrinos says. “It will be paramount for insurers to provide tailored solutions and value-add services focused on supporting and working with customers around risk improvements.”
In a roundabout way, it will be business as usual in this inherently challenging field, where brokers must equip themselves to respond to a constantly shifting landscape.
“Transport is a tough, competitive segment of the insurance industry,” Lambert says. “I don’t see that changing anytime soon.”