Quantitative data at last
How risk management is being informed by science
Zurich explains how risk management is being informed by science, to have real data to back up real-world observations
Risk assessment and management has long been a core feature of insurance, and affects the most salient factors of the insurance policy of every business: the size and scope of its cover, its premiums and its excess. But how much of that risk assessment is driven by actual research and how much is gut feeling?
A new study by the University of New South Wales, jointly sponsored by major trucking insurer Zurich Financial Services Australia and government safety agencies, may provide some answers.
The study sought to establish what safety management features distinguished lower insurance claimers from higher insurance claimers, and found evidence of 14 safety characteristics that differentiated between them. These 14 characteristics were then compared with risk management factors included in the risk assessment process used by Zurich. The scientific results correlated strongly with Zurich’s decades- old formula, but with a few interesting anomalies.
It’s hoped having real data to back up real-world observations will lead to fewer crashes and a better deal on insurance for fleet operators.
“Sometimes you need science to back up common sense,” Zurich head of risk engineering Mervyn Rea says.
“There’s a gut feeling among risk engineers that the more safety conscious you are, the more likely you are to avoid crashes. What the UNSW has done is confirm that gut feel.”
The research was headed up by UNSW’s Lori Mooren, who was granted access to Zurich customers’ claims data, with Zurich also assisting with the recruitment of policyholders so the study could examine their safety management systems.
The 14 key practices associated with lower claiming customers were grouped into three key areas: risk assessment and management – which includes topics relating to fleet, environment and job risk safety management; driver risk management – covering driver employment, remuneration, training, monitoring, discipline and incentives; and safety culture management.
Rea says Zurich’s grading system aligned closely with the findings from the study. However, the research did throw up some curveballs.
For one, fleets with higher claims were more likely to use GPS and telematics than those with lower claims. Rea puts this down to the fact that many operators aren’t using telematics for safety purposes, but purely for fleet logistics.
“They’re not necessarily monitoring driver behaviour. Today’s telematics systems have the ability to monitor
key elements of a driver’s style: their rate of acceleration, harsh braking, sharp cornering, speeding … it can provide an overall risk profile of each driver. But some operators just aren’t switching on those capabilities, or they’re getting the information but not doing anything with it.”
Another finding from the research confirmed the importance of ensuring drivers are paid for all hours worked, regardless of the task or activity. It cites previous studies that have demonstrated the method of driver pay influences safety outcomes. While Zurich’s grading system doesn’t address the matter of paying drivers for all hours worked, it advocates for creating an emphasis on driver retention and above-award payment and packages for safe, skilled drivers.
“Productivity has to be taken into account,” Rea says. “But the KPIs need to incentivise the right behaviours, for example, KPIs around the number of jobs a driver completes might inadvertently incentivise riskier driving.”
If Rea could nominate the top three factors that influence the number of crashes a company has, he would say they are “drivers, drivers and drivers”.
“Well over 90 per cent of all crashes are caused by human beings. So we need to focus on driver recruitment, supervision, assessment and training. If you’ve identified a problem with a driver, encouraging that driver to improve their driving is so important. You can do that by having good performance management systems, good KPIs, but also by having training available.”
Each company’s driver profile is examined as part of Zurich’s risk management assessments: “We don’t look at the individual driver but we look at things like the number of full-time salaried staff, how many drivers are casual, how many are part time. Full-time employees tend to be more supportive of the company’s ethics and be more loyal. So we ask about a company’s policies around selecting and onboarding new drivers.”
It’s not just about insurance, though. Rea points out that, by having a better-managed fleet, you’ll not only save on insurance premiums and excess through lower frequency and severity of crashes, but you’ll become a more profitable company.
“There are so many other benefits: fuel savings, reduced wear and tear, better customer satisfaction, reliability.”
Zurich will soon be releasing an app that will allow a business to self-assess its fleet risk-management. It is hoped this will empower operators to be pro-active in making changes to improve their risk management.
“The app will directly mirror the process our risk engineers use currently when we do our assessments,” Rea says.
With science now backing up what most sensible people have long suspected, and technology readily available to help make change, there’s no excuse for operators to ignore key risk management factors.
“Today’s telematics systems have the ability to monitor key elements of a driver’s style.”