December 11, 2018

December 11, 2018 | Broker News


Technology that puts risk management in the driver’s seat

Transport companies that put risk management first – aided by the latest technology – do more than improve their safety record. They can also make significant impacts on their bottom line, says Zurich’s Mervyn Rea.

Imagine this: a truck driver in your fleet is involved in a crash. He escapes with only a minor injury – but needs time off work. The truck will be off the road for more than a week for repairs. The truck’s load has to be delivered by another driver, and is late – interrupting your customer’s supply chain.

Your motor insurance will cover the repair costs to the truck. But what about the uninsured costs – such as the driver’s salary while off work, or finance repayments on the truck while it’s sitting idle in the garage? Then there’s the impact on the driver morale, the potential loss of business, and reputational damage – not to mention the extra administration and investigation costs following an incident.

While insurance is an essential protection for transport businesses, it’s only one part of an overarching risk-management strategy, says Mervyn Rea, Head of Risk Engineering (Australia and New Zealand) for Zurich Financial Services.

“Every time an insurance company pays $1 of your claim, there can be as much as $3 in uninsured costs1,” Rea explains. As such, he says it’s critical for businesses to have strong risk-management processes in place.

“Having a stronger focus on true risk management and ensuring that risk management forms part of all the decision-making processes, can pay dividends for transport companies.”

Focus on safety

With human error responsible for up to 98 per cent of all vehicle crashes2, it makes sense that any transport risk management strategy starts with a culture that cares for drivers’ wellbeing. This needs to be led from above, with management recognising the importance of drivers to the company’s success, maximising retention of experienced drivers, and fostering safer working conditions.

One way to do this is through investment in technology that monitors driver behaviour and safety. For example, Seeing Machines technology scans the driver’s face for signs of early onset fatigue and distraction. It then alerts the driver, reducing the immediate risk, and records the incident, providing valuable data that can be used later for driver training.

Telematics that monitor driver performance can also pick up behaviours such as harsh braking and cornering, or speeding. This data can be used to identify drivers who need additional training, improving their driving and reducing incidents over time.

Investing in safer driving is of clear benefit to drivers, but Rea says it’s also a sound economic decision.

“We’ve seen companies use these technologies to reduce their claims costs by 20 per cent or more. Some also save up to 10% in fuel and maintenance costs,” says Rea.

“That’s because a safer driver is a more economic driver. There’s less wear and tear on the engine components and brakes, which significantly lowers maintenance costs.”

“You’ll also see that fuel efficiency improves. And given that fuel is one of the single biggest running costs of the heavy transport fleet, any saving is going to directly improve profit margins.”

Obstacles to managing risk

Highly regulated transport businesses, like long-haul fleets, are already embracing driver-monitoring technology with great results. But smaller players have been slower to respond.

Rea believes one of the main obstacles is the overwhelming range of available technologies to choose from, and high implementation costs. For companies with narrow margins and fluctuating fuel costs, the temptation can be to choose the cheapest option with the most basic form of mandatory and regulatory compliance.

Rea says that this can be a false economy when it comes to effective risk management.

“Investing a little bit more, and implementing reactions to the data that those systems provide, will give you the biggest bang for your buck,” says Rea.

Seeking advice

While choosing the right technology can be daunting, Rea says that helping transport businesses understand the available options, and then finding a solution that best supports their risk management strategy, is where brokers can add the most value.

“Brokers can articulate that a lot of financial burden caused by crashes – like damage to brand and reputation, and failure to perform – are not insured,” says Rea.

“By focusing on advice instead of the cheapest price and helping transport clients to invest in the right technology, brokers can help them to generate future savings, which will actually improve their reliability and profitability over the long term.”

 

1 Managing work-related road risks, Zurich Insurance, 2014 https://www.zurich.com.au/content/dam/au-documents/business-insurance/risk-engineering/managing-work-related-road-risks.pdf

2 Crashes are no accident flyer, U.S. General Services Administration Office of Motor Vehicle Management. https://drivethru.gsa.gov/DRIVERSAFETY/DistractedDrivingPosterA.pdf