What’s driving fleet insurance?

What’s driving fleet insurance? | Insurance Business

What’s driving fleet insurance?

Major legislative changes are coming to the transport industry in October 2018. Insurance Business talked to the experts to see what’s ahead

Commercial fleets are big business for car sellers in Australia. According to VFACTS, a whopping 52% of new car purchases during 2017 were accounted for by business, government and rental buyers. Accordingly, commercial fleets also represent big business for insurance companies. It’s an area that presents a unique set of challenges for brokers and providers alike, but nonetheless provides a valuable service to businesses all over Australia.

Yet it’s far from a static service. Fleet insurance is constantly evolving as providers aim to better meet the needs of consumers. Recent examples of this evolution include new-for-old replacement, expenses and driver repatriation. In some cases, policies even cover funeral expenses and trauma counselling services for drivers, family and staff following an accident. These are services that go well above and beyond the simple ‘repair and replace’ policy that had previously dominated the market.

Additionally, fleet pricing is now more stable and based on data and analytics. Specialists must understand customer segments, occupations and benchmarks for ‘standard’ risks.

“We are seeing a flight towards quality across the fleet insurance market,” says John Hill, national underwriting manager for heavy motor at NTI. “Businesses are looking to their insurance representatives to provide advice on how to best protect their operations as a whole.”

Finding the right partner

Steve Hamilton, general manager of client services for Fleetsure, cites four main factors brokers should consider when selecting a commercial fleet insurance provider: “Consistency in pricing, depth of coverage, quality of security, and the level and speed of service are crucial when selecting an insurer.”

An insurer should be able to explain how a client’s risk profile varies from the standard and why the premium is higher or lower. Armed with this information, fleet owners can take actions to change risk and shape their premium according to their individual needs.

Realistically, fleet owners can expect to make claims far more frequently than owner-drivers. An owner-driver might make a claim every few years throughout the lifespan of a car, if at all. By contrast, fleet owners might make a claim every few months due to the larger scale of vehicles, greater variety of drivers and overall time spent on the road.

“Price is still important, but overall value for money has become more important. Additional services ... such as risk management, client engagement and flexible claims solutions are being given increased importance” - Tony Dodd, GT Insurance

Risk evaluation and the knowledge and skills of the underwriting team are also key considerations.

The transport sector is continually evolving, so it’s important to have an underwriter who understands the client’s needs and can arrange appropriate products to cover the risk. Finally, access to decision-makers at all levels will ensure fair and reasonable outcomes for your clients.

Cost, of course, remains a driving factor when choosing an insurer, though it shouldn’t necessarily be the deciding factor.

“Price is still very important, but overall value for money has become more important,” says Tony Dodd, general manager of sales and distribution at GT Insurance. “Additional services outside of the traditional products, such as risk management, client engagement and flexible claims solutions, are being given increased importance.”

The benefit of aligning with a known specialist insurer is that they have an intimate understanding of the requirements of the business and the adviser, as well as a foundation built on experience.

“Engaging with a specialised insurance provider typically means product and service inclusion that are more closely aligned with the client’s needs and are designed to complement each other,” Hill says. “For example, in the heavy motor area, marine and motor product often go hand-in-hand.”

“We are seeing a flight towards quality across the fleet insurance market” - John Hill, NTI

Additionally, brokers and customers alike should never underestimate the value of picking up the phone. Whether it’s a claim, advice or support on a product or offer, access to an expert is a great value-add.

Whatever the individual needs of the fleet owner, having a high standard of insurance in place is absolutely essential. Vehicles are an integral part of the business – indeed, they often are the business. Having the correct insurance policies in place is vital to a fleet’s livelihood because every day a vehicle is off the road, it hurts the overall bottom line.

The road ahead

Significant legislation changes will be occurring in the next few months that will have a substantial impact on commercial fleet insurers and customers alike. As noted on the National Heavy Vehicle Regulator’s website: “On 1 October 2018, the Heavy Vehicle National Law [HVNL] will be amended to provide that every party in the heavy vehicle transport supply chain has a duty to ensure the safety of their transport activities.”

For HVNL-participating jurisdictions, these legal reforms will significantly broaden the scope of who is considered part of the transport industry and what responsibilities they need to manage. This will likely result in significant concern from consignors around how they select transport service providers. However, there is an opportunity for fleets to leverage current and past investments in safety to gain an advantage when competing for work.

The reforms will also likely necessitate considerably more communication between parties in the transport industry. Fleet operators will need to consider how they gather information around risk management and compliance from employees and subcontractors. It will also change how they respond to safety-related issues and how they communicate them to their customers.

Most importantly, this new legislation will establish a positive obligation across the industry to mitigate public risk much more effectively. Ultimately, it will bring about a safer industry with more accountability and more responsible clients taking a proactive approach.

“There is no doubt that the commercial motor market has hardened ... [Brokers] need to be communicating with clients to ensure they’re not passing on bad news a week or two before premiums are due” - Steve Hamilton, Fleetsure​​​​​​​

Aside from these legislative changes, the industry will also continue to adapt, driven both by client needs and external market forces. Broadly speaking, pricing will rise; modern vehicles are simply more expensive to repair. Occupations with a higher claims frequency will require innovative and nimble programs to manage their risk profiles. Congestion in capital cities, along with driver shortages, will also continue to be a challenge for business owners.

“There is no doubt that the commercial motor market has hardened,” Hamilton says. “Brokers will be presenting premium increases to clients, and they need to be communicating with clients to ensure they’re not passing on bad news a week or two before premiums are due.”

Accordingly, customers are likely to look for more for their money to better justify their expenditure. “The benefits that insurers can provide outside of the traditional product will become greatly valued, particularly around long-term cost-saving measures,” Dodd says.

Additionally, self-driving cars are beginning to attract greater attention among the general public and insurance companies alike. The full impact they will have on the insurance industry in Australia remains to be seen; in all likelihood, it will be dictated by the precedent set by overseas safety records, government legislation and wider consumer pickup.

There is already a quiet technological revolution underway among fleet vehicles, which have seen the adoption of on-board cameras, greater use of telematics-based policies and the impending integration of electronic work diaries for fatigue monitoring.

“Ultimately,” Hill says, “these technologies will become more common and should lead to improved safety outcomes on the road.”