Quan­ti­ta­tive data at last

How risk man­age­ment is be­ing in­formed by sci­ence

Australian Transport News - - CONTENTS - WORDS RICKY FRENCH

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.”

Mervyn Rea

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