All road users will benefit from better insurance on trucks
AMENDED road legislation seems to call on all fleets to be insured for the cost of repairing road infrastructure after a crash, but fleet operators are more concerned with insuring their loads.
Norton Rose Fullbright senior associate Carol Holness said at a transport seminar held last week in Durban the new amendment was not being enforced, and there were many gaps in the “sloppy legislation” that would still be tested in court.
Nigel Pillay, head of corporate and business insurance at Standard Bank Insurance Brokers, said prevailing market circumstances were meanwhile driving the industry beyond conventional vehicle insurance towards policies that are written to manage the risk on behalf of transport owners.
“Besides traditional comprehensive coverage, many owners are opting to assume some of the risk themselves to reduce premiums,” said Pillay.
“One of the most common of these policies are those that offer aggregate limit cover, which stipulate the most an insurance company will pay for all covered losses over a year.
“This enables the company concerned to cap its premiums at set level to the benefit of the trucker who assumes a fair portion of the risk.”
Pillay warned brokers the economic downturn was making insurance cover extremely price sensitive. “As pressures to contain costs have mounted, so more customers are relying on strong relationships with their insurer or broker to keep premium and excess costs in check.
“As control of insurance premiums is one of the costs that can be tailored or reduced, it is usually one of the first expenses examined when operating costs have to be reduced to maintain margins.
“Of course, one of the dangers is that values and cover can be excessively reduced, which adds substantially to costs if a major accident or disaster occurs.”
He warned clients that the conventional strategy of reducing premiums by accepting high excess payments contains significant risks for transport owners.
“They have to make sure that their cash flows are strong enough to carry the higher excesses that need to be paid.”
Pillay said lack of insurance is a major problem, with up to 70% of commercial vehicles, or seven in 10 trucks on South African roads, either having inadequate insurance or no insurance at all.
Kathy Bell, a specialist in transport solutions at Standard Bank, told Wheels the voluntary adoption of standards, such as the Road Transport Management System, (RTMS) can make premiums lower.
Bell said the RTMS has seen a large increase in members in the past year, and all the members are truck owners who have committed their fleets to various safety and quality standards.
But buy-in from each driver is key to the success of the system, she said.
Pillay said the present economic situation adds further complexities to a transport industry that already faces a myriad of risks whenever a vehicle takes to the road.
“The fluctuating value of the rand means that the price of imported vehicles and the parts required to repair them are constantly changing. Most of this risk is assumed by insurance companies.”
Most categories of routine insurance coverage written in South Africa usually include: • Coverage for goods in transit; • Cross-border coverage for vehicles and loads travelling through sub-Saharan Africa; • Third-party liability; • Accident assistance that also covers the cost of wreckage removal and environmental damage caused by spilled loads that can range from oil and fuel to chemical spills; • Sasria insurance, which covers vehicles and loads for damage caused by civil unrest.
“Although these categories seem to cover most eventualities, the reality is that the industry is never free of risk — even when a majority of the fleet is parked in a controlled area.
“Additional hazards like fire can reduce a multi-million rand fleet housed in a secure site to ashes,” said Pillay.
Risks only increase when vehicles take to the roads and face hazards that can vary from inclement weather to crime and the fact that many drivers do not have the requisite skills required to handle large rigs.
Although telematics are playing a role in reducing hazards by closely monitoring driver behaviour, abuse of vehicles and fraudulent activities, insuring South Africa’s heavy fleets — the lifeblood of the economy in the absence of an effective rail network — will always remain a challenge, said Pillay.
“Insurance companies and responsible truck operators are playing their part in the equation by working together to identify and implement strategies to reduce risk and therefore the costs of operating a fleet. The beneficiaries of these actions are not only the parties involved, but South African consumers as a whole, who rely on these vehicles for many of the goods and services that are taken for granted,” said Pillay. — Wheels Reporter.
Insurance companies and responsible truck operators are working hard to reduce incidents like these on the N3.