In fact, there many subtle differences in the wording and the level of cover provided by different policies, even those provided by ‘blue ribbon’ insurers. These loopholes can result in uninsured losses exceeding tens or even hundreds of thousands of dollars, exposing the broker to a professional indemnity claim.
Most policies for passenger vehicles provide robust levels of cover. Potential losses are much smaller and in general, most claim problems can be easily negotiated to a satisfactory outcome.
However, greater focus needs to be taken when comparing commercial and heavy motor fleet policies. Special consideration needs to be given to:
Here’s a list of things to watch out for:
1. Automatic addition and deletions
Be careful of conditions that require the client to notify the insurer of new vehicles within a restricted time-frame. Fleetsure provides automatic cover for additions and deletions.
2. Accessories fitted to the vehicles
Many policies only cover factory-fitted accessories or for a fixed value of after-market accessories. Many heavy vehicles are equipped with numerous high-value after-market accessories, such as bull bars, driving lights, GPS systems, platform-loading elevators and cherry pickers. Often these accessories are not listed on the schedule, but the client still expects them to be covered. Fleetsure provides automatic cover for all fitted accessories.
3. Trailer in control (non-owned trailer) liability
Many policies exclude certain trailer types (e.g. tippers, tankers, refrigerated or livestock trailers) from this automatic cover. Fleetsure policies do not exclude trailer type.
4. Third-party liability
The level of third party liability varies markedly between policies. Some can be as low as $20 million. Fleetsure provides $32.5 million in public liability cover.
5. Co-insurance or average clause (under-insurance)
Be careful when offering a policy that contains a co-insurance penalty clause. Fleetsure does not impose these old-fashioned penalties.
6. Basis of settlement (finance payout)
Some wordings exclude first and theft losses from pay-out benefit. Fire and theft losses are usually write-offs, which is exactly when finance pay-out benefit is needed. Fleetsure policies do not have fire or theft limitations.
7. Nasty endorsements
Many on-line quotation systems automatically impose endorsements that exclude young or inexperienced drivers, especially in control of heavy vehicles.
The conclusion is simple: make sure you are offering your clients policies that provide the best insurance and not just the best price.
Macropod collisions
The return to favourable seasons means the size of the kangaroo population has increased significantly, posing a steady threat of vehicle collisions, even in urban areas. As an aside, European car manufacturers have faced the unusual problem of developing software that can identify the unusual bound of the kangaroo rather than the four-legged gait of deer, moose and other animal risks in the northern hemisphere. These technologies make certainly make vehicles safer, but often result in much more damage from front or side kangaroo impacts.
‘Flash tradies’
There has been a huge adoption of ‘luxury utes’ by businesspeople in recent years following changes to fringe benefit taxation rules. Once the king of the high-end utility market, the Toyota Hilux SR5 is being challenged by European contenders, such as the VW Amarok and Mercedes Benz X Class, along with American style “muscle” utes. Insurers and brokers will have to deal with the impact of the higher repair costs of these brands as they start to become more common in fleet schedules. The days of $700 premiums for a tradie’s ute are long gone, just like Australian-made Holden and Ford utes.
Exhaust theft is not just hot air
The progressive introduction of emissions reduction systems in heavy motor vehicles in recent years has given rise to a new expression of criminal endeavour. With catalytic convertor systems costing upwards of $12,000 to replace, the targeted theft of exhaust systems from truck yards and dealerships has increased dramatically. A simple way to mitigate this risk is to spot-weld the attachment bolts holding the exhaust units in place.
Heavy metal fatigue
The declining quality of metal alloys used by some overseas manufacturers has significantly reduced the life span of many hard-working machines, such as concrete pumps and reach stackers. Many insurers have identified these problem makes and models, and cover is becoming harder and more expensive to source.
Smashing repair costs
With the huge amount of infrastructure projects being undertaken in Australia, many construction companies are using attenuators (vehicle-mounted crash barriers) to protect the safety of workers near high-speed roadways. These units are remarkably effective but incredibly expensive to repair after being hit by a speeding vehicle.
There’s no such thing as ‘free’ windscreens
It is no secret that windscreen suppliers have long encouraged their customers to claim the cost of windscreen repairs or replacement from their insurance policy. These replacements are often undertaken without any assessment or alternative quotes being obtained. Until a few years ago, the cost of windscreen claims generally amounted to a few hundred dollars, meaning many insurers were happy to offer an excess-free benefit. However, modern windscreens now incorporate all sorts of technology, such as vision, temperature, light and rain sensors, meaning replacement costs are now several thousand dollars. These increased costs have had a direct and substantial effect on premiums.
Or ‘free’ hire cars
In addition to third-party demands for repairs of their vehicle(s), unscrupulous credit hire companies are now making exorbitant demands for the supply of hire or replacement vehicles to innocent third-parties. Whilst most clients and the insurance industry are willing to accept liability for the fair cost of ‘making good’, gouging the insurance policies of ‘at fault’ clients is creating an unprecedented expense that will ultimately be built into premiums. For example, we recently received a demand for $45,000 in car hire charges following damage to a 2014 Audi Q7, which was more than the pre-accident value of the damaged unit!
While it is unlikely that a client will breach their policy by employing drivers with international licences, this practice does pose a risk to the financial costs of insured or uninsured losses and OH&S.
For a start, some foreign licences do not have the relatively robust structure, processes and protection of Australian licensing regimes. Disclosure of underlying medical conditions, eye tests, understanding of local road rules, even basic handling of a vehicle are fundamental to obtaining an Australian licence.
It’s not a criminal offence for a prospective employee to embellish a job application – but it is to give false information on driver licence applications. The fact that a driver holds an Australian licence doesn’t necessarily mean they are a good candidate for a job – but it does mean they are capable and entitled to operate a vehicle.
A quirk in the demerit points system used in most Australian licensing systems means that international licence holders can incur numerous demerit points yet continue driving. This quirk not only discourages responsible driving but exposes employers to high risk.
Employers may have a higher duty of care for the conduct of international drivers, who may have not been through a more stringent Australian licensing system.
Another major problem is that drivers with international licences are often only temporary visitors. Problems can arise when the fleet owner has incomplete (or no) contact details and the driver has already left the country.
Obtaining the employee’s home or next of kin contact details may go some way to help in collecting crucial details to defend a third-party allegation of an accident but contacting them often remains a near-impossible task.
Australian commercial and heavy motor vehicle fleet insurance policies are generally tolerant towards clients making claims involving drivers with international licences. However, we believe the job of a full-time driver should be held by an Australian licence holder!
The willingness of a new employee to obtain an Australian licence is a good indicator of their intention to remain in the job and in the country – a crucial factor when considering the cost of induction and training.
An employee who holds a foreign licence may be entirely appropriate to occasionally drive a company vehicle as part of their job as a plumber or baker. However, it’s a different matter entirely if the job entails a lot of driving.
EXTRACT FROM THE RMS WEBSITE:
If you hold an overseas licence, you are allowed to drive the vehicles covered by your overseas licence in NSW indefinitely, as long as:
You don't have to get a NSW licence if you comply with these conditions and can prove your genuine visitor status to NSW Police, if required.
SETTING the expectations for drivers through orientation and an initial training process is the basis for fleet safety.
Sedan and light commercial fleet vehicles are one of the largest contributors to work-related death and injury across the country. Yet, Occupational Health & Safety data suggests this is one of the least well-managed areas.
Safety has to be integrated into operations to minimise the impact of both direct and indirect costs. Keeping drivers safe and on the road increases profitability and minimises the ‘soft’ costs of doing business.
The benefits of managing work-related road safety can be considerable, no matter the size of your client’s business. The true costs of accidents are far more than just the costs of repairs and insurance claims. The potential physical and emotional costs associated with a vehicle crash can easily run into tens of thousands of dollars.
All new employees should be given a formalised orientation and training on the use of company vehicles. Complying with road laws be considered a minimum safety standard but it is not necessarily a guarantee of optimum safety. Industry best practice should be the goal.
An orientation program for drivers should articulate the company’s safety program, its importance and value to the business and clearly establish the framework surrounding the use of vehicles on company business.
Other potential benefits of an orientation process include:
The orientation program should be well defined and formal, with objectives of the session explained to the participants. During the session, employees should have an opportunity to ask questions and clarify any aspects of the company’s fleet program.
At a minimum, the following topics should be covered:
All staff who have access to a company vehicle or drive on company business should attend a driver orientation program. The alternative is casual training from fellow employees or worse still, learning through a costly process of trial and error, or as we call it, ‘crash and crash through’.
Many fleet operators will say it’s hard to find ‘good’ drivers and therefore are willing to cut corners. Choosing the wrong employee in any company is a mistake. Choosing the wrong driver in a fleet situation is a disaster waiting to happen.
It would probably better to leave the vehicle in the yard than to employ a driver who shouldn’t be on the road. Quite aside from causing damage to company and third-party property, poor drivers pose a serious danger to themselves, the public and your company’s reputation.
Identifying and recruiting quality employees is a key area of risk management in commercial and heavy motor vehicle fleets. In addition to the usual selection criteria (e.g. employment history, competency and experience), the driving skills and history of an prospective employee must be taken into consideration.
Most policies provide broad and generous cover for all drivers, with few, if any restrictions. However, clients and brokers must be aware of any conditions (e.g. minimum driver age, minimum experience and/or exclusions) that may have been imposed if the insured has a poor loss history or is in a high risk sector.
While many clients claim to employ ‘only drivers aged at least 25 years, have at least two years’ driving experience and no accidents or conviction’, the reality is that most professional drivers have some blemishes on their driving records.
It is strongly recommended that prospective employees complete a driver’s declaration and obtain a print-out of their licence history. These declarations are readily available from most fleet insurers and provide a legally-binding account of the driver’s accident and insurance record. Not surprisingly, many drivers treat these forms more seriously than their job application itself.
State traffic authorities can provide detailed licence records, including the date of issue, licence classes and previous driving offences, convictions and penalties, for a small fee. All prospective employees should provide these records prior to an offer of employment and then annually.
With the completed driver’s declaration and licence history in hand, the fleet owner can then make a better decision about the candidate’s suitability for employment and potential risk to the fleet’s insurance policy.
Common sense must prevail, as many drivers have had incidents in the past, which must be weighed up with the importance and demands of the driving role.
For example, a plumber’s apprentice who occasionally drives a medium rigid vehicle may pose less risk than a driver of B double doing long-haul work. Likewise, a previous loss of licence due to a minor camera offence during a double demerit period might be viewed differently to a more serious offences, such as drink/drug, reckless or furious driving.
Some good rules of thumb are to only select drivers who have:
Most fleet insurers and brokers are happy, and generally encourage, an opportunity to assist clients with driver selection. Brokers can also provide access to specialist service providers, such as driver training or risk management programs.
However, when an accident inevitably occurs, the business stands to lose far more than its excess or no-claim discount. Losses can range from extended time-off due to injuries or trauma, all the way through to loss of life or reputation-damaging media coverage.
Fleet safety programs can do more than save lives, they add significant value to your business. A complete fleet safety program can help to:
The decision to implement a fleet safety program should not be a knee-jerk reaction to a serious accident. Rather, it should be seen as a manifestation of the company’s commitment to its staff and the public. It could also be introduced as part of efforts to win more profitable contracts with customers who demand high safety standards.
The first step in creating a safety program is the appointment of a safety officer, ideally someone who carries both authority and respect with drivers. In smaller enterprises, it might be the business owner. In larger fleets, it might be the fleet or human resources manager.
A safety program aims to formalise, document and enact certain procedures. As such, it is important that the safety officer is provided with the tools to do the job and the time to perform the additional workload. This will include additional documentation tools, such as audit checklists, driver declarations and investment in dash cams and hands-free communications.
Many policies contain important but overlooked loss-handling services, such as repair assessments, repair guarantees, recovery from at-fault third parties and defence against frivolous third-party demands.
Typically, clients who elect to take a higher excess policy in order to reduce their premiums are already incurring above-average claims and therefore are the ones that stand to benefit most from these free services.
Before recommending a higher excess policy, it is worth asking your client who will perform these tasks that were previously provided by the insurer and paid for within a policy premium?
Many clients will be able to perform some or all of these tasks using internal resources or in conjunction with external parties, such as their broker, insurer, legal counsel or an independent loss assessment or claims adjustment provider. However, there will be a cost associated with performing or outsourcing these services.
Likewise, large fleet operators might be able to manage the repairs process, either in-house or via their preferred repairer. However, they are unlikely to have the in-house expertise required to manage third-party claims or recoveries.
A key consideration when determining an appropriate higher excess level will be the expected number of additional self-insured accidents and establishing what claims handling procedures may need to be put in place.
Smaller clients moving to a higher excess may only have a fraction of the self-insured incidents of a large fleet. Large fleets, however, typically have internal fleet managers and review yearly their level of self-insurance and associated loss handling.
Most fleets of 25–50 units will likely have around 4 to 8 extra self-insured incidents to manage if they move the excess from $1,000 to $5,000. These low numbers do not warrant there being a robust loss-handling system put in place and will rely on their broker to be able to respond quickly to client requests for information, such as written market valuations on vehicles, independent assessment of a repair quotes and pro-forma Letters of Demand and Denial.
Maintaining records of self-insured losses is very important. If the client wishes to reduce the excess at some stage in the future, prospective insurers will want to understand the extent of losses occurring below the expiring excess level.
Incident reporting and recording should be maintained as though an accident was a conventionally-insured loss. Complete incident reports, claim forms and take photos! This information will prove vital in third-party recoveries and negotiations on fault.
NO-ONE wants to be the bearer of bad news, particularly increased insurance premiums. But just as the price of new vehicles increase each year, premiums can’t stay the same forever!
Here are some tips that can help you to prepare to deliver the news and retain the account.
And finally, it’s always good to ‘chew the fat’ with your client. How much do your clients realistically expect to pay to insure a $100,000 rigid truck? Surely, it’s lot more than a $50,000 ute!
While it is tempting to replace numerous policies throughout the year with a single fleet policy to reduce administration and premium costs, it must be remembered that each of these policies will its own claims history rating. Some policies will have a maximum no-claim bonus (or even a no-claim bonus protection benefit), while some will have lower ratings if claims have been made.
On the plus side, fleet policies tend to provide a high level of cover, including automatic cover for additions, principal’s indemnity and employee’s vehicle cover. The administrative ease of a common due date is also of great value to most clients.
Fleet policies are primarily underwritten based on their loss history. Very simply, the fleet premium will incorporate most, if not all, if the client’s claims. After a couple of years, the accumulative impact of their losses can far outweigh the benefit of broader coverage and ease of administration!
A $2,000 or $15,000 claim will have the same impact on a no-claim bonus premium. If a lifetime no-claim bonus is in place, these losses may not result in any premium variation at all. Whereas under a fleet policy, the premium rating will expect the client to pay back that loss, whether $2,000 or $15,000, over three or four years.
Premium impact under an individual policy may be a move from say a 60% no-claim bonus at $700 per unit to 40% at $1,000. Under a fleet rating, the full impact may see the per unit premium increase from the $700 premium to $2,000 per unit. Put simply, the insured can’t hide their loss history under a fleet policy!
When this applies to a fleet of 15–20 vehicles producing a premium of $30,000 to $40,000, it can be very tempting for the client to consider returning to individual policies and purchasing from the numerous direct online insurers.
Flat Premiums are the most common type of policy. Flat Premiums are suitable for clients spending up to $50,000 in premiums per year and where fleet management and vehicle maintenance are not key business management areas. The client knows exactly the cost of their premium and any potential losses. In general, flat premiums will change only if vehicles are added or sold throughout the policy period. The key disadvantage is that the client pays the pays the same premium each year regardless of whether they make a claim or not (other than a no-claim bonus) and has little involvement in the claims process.
Burning Cost policies are those were the client pays a deposit premium that is then adjusted within a minimum and maximum band using an agreed formula, driven by the overall claims cost of the policy. For example, the deposit premium is set at $200,000 with a maximum premium of $250,000 and a minimum premium of $150,000 adjustable at, say 100/70. In simple terms, the client pays a minimum of $150,000 per year plus $100 for every $70 in claims, to a maximum of $250,000 per year. This level will vary between insurers based on commissions, costs, required returns and so on. In effect, Burning Cost policies give the client a level of ownership of the size of the premium based on claims. They are attractive for clients who have had an unusually bad loss history and provide a clear incentive to minimise their claims. Conversely, the premium could be higher, adversely affecting cash flow and making it more difficult to arrange premium funding.
Aggregate Excess policies are those where the client pays a lower premium but pays the first agreed amount of losses incurred in the policy year. This amount is in addition to the standard excess that applies to each individual loss. For example, the premium is $120,000, the aggregate excess is $100,000 per policy period and the inner deductible (standard excess) is $1000 per incident. Under this arrangement, the client pays a $120,000 premium and the first $100,000 of losses before they can make a claim. Aggregate Excess policies are attractive options for clients who have the ability to handle losses themselves and have a fairly consistent loss history. They offer clients a lower upfront premium, a clear incentive to minimise losses and greater ownership of the repairs / claims process. Conversely, Aggregate Excess policies can adversely affect cash flow if the client suffers large losses early in the term of the policy.
Claims Experience Discount policies provide a partial refund of a flat premium at the end of each year provided total claims have not been above a pre-agreed figure. For example, let’s assume a CED of 50/65 is applied to a maximum of 20% of the premium. This means the insurer will refund 50% of the difference between the claim figure and 65% of the premium and capped to a maximum of 20% of the value of the flat premium. If the flat premium is $100,000 and the total claim cost during the year is $40,000, then the client will be refunded $12,500. If the total claim cost during the year is zero, the client will be refunded $20,000. CEDs are good for all clients if the insurance company will offer them. Its major drawback is that the refund is generally subject to renewing the policy with same insurer.