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FLEET INSURANCE
 In South Africa we tend to talk about motor insurance for our fleet. In the USA, the talk is about Accident Control Programmes that encompasses everything from accident assessment; repairs; claims; excesses; premiums; to driver training courses. In other words, it is a total programme NOT just insurance.
The fleet manager can be certain that unless he actively controls and motivates his drivers, the cost of insuring the fleet will continue to rise each year. There has been a recent swing with many fleets sending drivers on advanced driver training courses in an attempt to reduce accidents and the cost per accident. Some companies have been very successful, but it does need an overall plan in order to be successful and control these costs. One company of some 400 vehicles was able to reduce accidents by 50% over a period of 18 months.
The average expenses of an insurance company equate to 35% of premiums. This means that 65% of premiums are used to pay claims. Where a fleet has a level of predictable accidents, based on history, this results in a rand swopping situation. Only the insurance company really benefits.
One of the problems with fleets is that accident statistics are not always available. In today's market with hardening rates these figures and facts are essential in order to negotiate the best insurance package.
OPTION FOR THE FLEET OWNER:
COMPREHENSIVE PLUS UNIT EXCESS – This is the most common type of insurance, it is still used by nearly 50% of all fleet owners. However, it is usually inappropriate for a fleet of any size.
AGGREGATE EXCESS – The fleet owner is responsible for a predetermined amount of losses in any one year. After the company meets this loss, additional losses are met through normal insurance. Catastrophe cover can also be negotiated for high value vehicles in case of a write off. For example, based on history/statistics it could be agreed that the company will bear all losses up to R200,000 for the year. Claims in excess of this amount would be met by the insurer subject to an initial excess.
Calculating the initial figure would depend on your total accident control programme. The more effective it is, the lower the amount of money required for your fund and the lower your fleet operating costs.
RETROSPECTIVE RATING – This is based on the concept that the claim bigger fleet owner, for example, requires insurance for claims over R20,000 but also needs the services of brokers and insurers to deal with third party damage claims. Also to ensure that their own vehicle repairs are satisfactorily dealt with in respect of time and costs.
A deposit premium for the year is agreed. At the end of the year the insurers calculate a retrospective costing based upon an agreed formula and the necessary financial adjustments according to the cost of claims.
There are other types of insurance each with their pros and cons. The traditional "insure everything" approach is still being applied, but larger companies are retaining more of the risk themselves.
The cost of this risk and the type of insurance largely depends on implementing an effective accident control programme. Repair costs are high and multiplied by a 50% accident rate the costs mount up quickly. And this doesn't take into account down time and other side effects. This is one area of fleet management that can produce significant cost reductions with the minimum of time and effort.
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