When you are trying to keep down the cost of your fleet, insurance premiums might not be an area where you feel you have much control. But actually, you can get a good reduction in the amount you pay out – if you are willing to put in the time and effort. Reducing insurance premiums is a long term project.
When you want keep costs down, it’s always tempting to go for quick, big short term victories, especially when there are targets to meet. The problem with this approach, however, is that eventually these easy cost reductions start to dry up and the gains become harder to realise or start to negatively effect productivity or other sources of business value. This is not to say that there’s no point in making these kinds of savings. But any program to bring down costs needs to look at longer term, more sustainable gains too.
To find out about the sort of changes organisations need to make to optimise their insurance payments and take a sustainable approach to risk, we spoke to Nick List, Zurich Fleet Intelligence European Proposition Manager from Zurich Insurance Group.
TomTom: What areas must a company focus on to reduce their risk profile?
Nick: Firstly, focus on management issues. This is not simply ensuring that strong work-related road risk management policies and procedures are in place – although this is obviously important – it is also ensuring that the operating practices and procedures are such that employees can drive safely. This should be seen as a priority as it helps create an environment in which employees can be safer on the road.
Secondly, develop the on-road safety culture in the organisation. The aim here is to get employees to recognise that they may not be the best drivers in the world, which will help them ‘buy-in’ to any safety initiatives that are put in place. It will also make them more likely to make permeant behavioural changes to their driving, leading to sustainably lower risks and so fewer collisions. This takes a long time and is likely to be achieved using a variety of methods such as regular communications, safety discussions, campaigns, driver feedback, etc.
TomTom: Would you recommend changing suppliers to consistently find the best deal or forming a long term relationship with an insurer and why?
Nick: A motor fleet operator needs to determine the type of insurance solution that is required for the risk exposures that exist for the respective motor fleet it operates. This should then be aligned with the buying criteria of the company as a whole. Does the culture of the company mean that, generally, short term transactional fixes are sought or is the outlook to seek long term continual improvement type solutions? In view of the capital and resource investment required by insurers, and the change management costs incurred by motor fleet operators who change carriers frequently, then the development of a long term relationship or partnership approach is the preferred route. Over time mutually beneficial programmes are designed that lead to a reduction in the cost of risk for the motor fleet operators and, ultimately, a lower cost of ownership.
TomTom: How do you work with companies to help them identify and manage common collisions and risks?
Nick: There are a number of ways in which we work with our customers. Generally, we start off with a gap analysis looking at the organisational risks a company faces and try to understand more about what they are doing well and where they may need our support and or guidance. The gap analysis also helps us to get a better idea of a company’s safety operational balance and attitude/appetite for risk.
The outcomes of the gap analysis will determine next steps in terms of supporting our customers, be it with online risk assessments, e-learning, consultancy or another risk-focused intervention or approach as identified through detailed dialogue with and understanding of the customer. We would like to stress that our whole approach is focused on a partnership with our customers and reducing the total cost of risk for both the customer and, ultimately, Zurich. We always ensure any output a customer receives from us is technical and honest in every way and that has helped a number of our customer achieve amazing reductions in the numbers of collisions and dramatically improved the safety of their fleets.
TomTom: What sort of objectives and KPI’s would you set for premium reductions based on improved training and education on safer driving?
Nick: As 70% -75% of motor fleet insurance premium consists of attritional losses (claims cost) then the key objective for motor fleet operators is to reduce their collision rates, which will contribute to reducing the ultimate attritional claims cost. This will only be achieved over an ongoing period of time if an on-road safety culture is developed with the organisation.
TomTom: How often would you recommend renegotiating a contract? And on what basis?
Nick: Insurance industry “legacy” generally means annual contracts are the norm, but there should be more desire from both insurers and motor fleet operators to enter into longer terms arrangements (2/3 years). Long term relationships/partnerships manifest synergies in outlook, with a joint desire to reduce the cost of risk.
TomTom: How can businesses use telematics data to reduce the number of claims, their risk profile and ultimately their premiums?
Nick: One of our customers once stood up at one of our regular fleet safety events and said telematics is no “silver bullet” – and that is so true in our opinion. Only those customers with a keen appetite to manage their fleet risks and work closely with the data generated by telematics, their drivers and insurer will see the amazing results in terms of the crash and fuel reductions we have all seen published. For a lot of organisations this is just too much and falls into the too difficult to manage category.
Using the driver behaviour data generated (and that in itself is a challenge as there is no standard definition of driver behaviour – for Zurich it is harsh braking, acceleration, cornering, lane changing and speed versus posted speed limits), working with drivers to understand why the telematics have been installed, discussing the benefits the drivers can get from the system and coaching drivers when an issue is identified, companies will see wins in terms of fuel and collision reductions, as well as a much more efficient and operationally effective fleet. But all of this is not something that can be done overnight or just for a short period of time: this approach has to become part of the organisations DNA. Then it really works and delivers spectacular results!
TomTom: How much time does it normally take a business to report accidents to you? What are the cost implications?
Nick: This depends upon the culture of the individual organisation and their internal policies and procedures, as well as the culture and behaviour sets that exist. The general view is that the ultimate cost of Third Party claims is impacted by the speed with which the actual claim is reported to insurers and the quality of the information provided at the time of notification.
TomTom: Will technology help you reduce this time (FNOL – First Notification of Loss) and therefore can this cost saving be passed on to customers?
Nick: This will depend on the technology fitted as well as the insurers’ ability to “catch” the “pitch” from the respective devices. Any saving in claims cost will ultimately manifest itself into reduced premiums.
TomTom: What else could a business do to keep premiums down?
Nick: The more self insurance that a fleet operator takes, the less the risk transfer premium becomes.
