Zurich’s John Briggs

“A staggering 97% of businesses don’t check their employees’ driving history and if their cence is in order before they get into a car”

The shock disclosures that the vast majority of Britain’s fleets are not undertaking the “basic package” of fundamental risk management measures – embracing staff driving licence checks, issuing driver handbooks, investigating accidents and pre-employment checks of driver competency and experience – should send alarm bells ringing throughout companies and boardrooms. It is even more amazing when it is considered that about a third of all road accidents involve at-work drivers, resulting in 20 fatalities and 250 serious injuries each week, according to Department for Transport figures.

Kevin Edwards, Norwich Union’s head of motor underwriting, says: “Data from 12,000 of our fleet policyholders revealed that only 15% were implementing a programme of fundamental risk management measures. In addition, less than half of the 15% currently undertaking basic risk management are not using any form of on-going driver-training programme to help improve driver performance and minimise risk.”

Of the 85% of fleets who appeared to be taking no action and ignoring the raft of legislation, advice and protocols as well as newspaper and magazine headlines, Mr Edwards says: “They might be undertaking one or two initiatives within the basic package, but no more.” Overall, he concludes: “Fleets still have a long way to go in terms of using effective risk management. There just isn’t a risk management culture among the majority of people who operate fleets in the UK. That is not to say there have not been improvements, but it is a very slow process.

“We do see improvements in some fleets’ accident records year-on-year and it is awareness and publicity that is encouraging action.” Zurich’s survey of 200 businesses with turnover of between £1m and £20m highlighted that, while 41% of fleets evaluated a car for its work suitability, less than a quarter of those surveyed undertook any form of roadbased driver training or assessment and only 8% undertook web-based driver assessment and training.

Norwich’s Kevin Edwards

“Too many fleets only look for the cheapest insurance premium. We are trying to change that outlook and commodity mentality …”

Given that both surveys highlight significant risk management inadequacies in the majority of small, medium and large fleets it is puzzling that numerous industry surveys – notably the annual Fleet News New Year survey – highlight risk management and duty of care as the key issues facing the industry in 2004. John Briggs, motor manager for Zurich Commercial UK, which insures in excess of 600,000 fleet vehicles, says: “Awareness is growing among fleet operators that they have a health and safety responsibility towards their employees who drive on business. They should look at risk management as a legal and social responsibility; that should be their key motivator for introducing a risk programme.

“Businesses are worried about the dangers that their employees can face while driving on business, but not enough are doing something about it. We are urging employers to look at developing a fleet safety culture. Employers need to take control of managing driver safety by assessing their drivers’ awareness and acting on the information. There is a need to take action.” Zurich says that companies’ health and safety policy should include work-related road safety, there must be high-level buy-in for the policy to function and the policy must be communicated to all staff so employees know what is expected of them.

Unfortunately, says Mr Edwards, too much fleet management emphasis is placed on the vehicle – on the road price, performance, ride and handling and available features – and not enough on the driver. “We want to see a cultural change which sees the fleet management balance between the car and the driver shift. It is about looking after people when they are driving and not all about procurement and disposal of vehicles,” he says. Mr Edwards wants more insurers and brokers to highlight risk management techniques and programmes when discussing insurance premium renewals with fleets. He also says companies should stop treating insurance as a commodity.

“Too many fleets only look for the cheapest insurance premium. We are trying to change that outlook and commodity mentality so that risk management is higher up the escalator, but it is an evolutionary process,” he says. “We are trying to focus on encouraging fleets to put the risk management basics in place because that is where the process starts. “We actively look to find out whether clients are managing the risk because that can have a significant impact on premiums.” Although it is difficult to quantify exact premium savings as a result of an on-going risk management programme, Norwich Union says that premium savings of 20-30% are not uncommon as a result of improved claims experience. Add on to this the numerous other bottom line benefits and the financial savings for fleet are numerous.

“We want to reward wellmanaged risks and to do that we first need to know the real-life risk level”

Zurich suggests that the “hidden” costs of vehicle damage could be up to 30 times the cost of the damage, with Mr Briggs saying: “There are significant cost-saving motivators for being pro-active on risk as well as boosting staff morale, reducing staff sickness levels and delivery delays and addressing the negative impact on the company’s reputation caused by road accidents.” It is, therefore, strange that despite the publicity, the financial savings and numerous warnings that the legislative noose is tightening around the necks of companies, fleets and their directors, the vast majority of the UK’s fleets appear to have adopted an ostrich-like mentality to improving their health and safety record.

Although there has been a slow growth in risk management in recent years, Norwich Union says there is a distinct difference between the approach of large and small fleet operators. “The very large operators tend to employ dedicated motor fleet managers. However, small and medium enterprises, with the exception of some hauliers, often do not have the benefit of such expertise in-house. The situation is worsened by the prevailing attitude among many small fleet operators that risk management does not apply to them. They fail to understand their liability for the safety of their drivers and potential cost benefits of implementing basic measures,” says Mr Edwards.

In an effort to overcome such resistance, Norwich Union’s risk advisers – who see 1,500-1,800 customers a year – and brokers working on the company’s behalf are increasingly looking to hold meetings with financial directors as they hold the purse strings. “We recognise that there needs to be more emphasis on the financials and the benefits that risk management can produce. But as well as our risk advisers we rely on our brokers to promote fleet safety and it is a case of teaching the brokers,” he says.

RAC data predict that over five years, driver training can reduce accidents within any given company by up to 70%

A potential stumbling block to brokers being encouraged to work with fleets to reduce risk is that many brokers earn commission based on the premium charged – the higher the premium, the higher the commission. However, says Mr Edwards, some brokers were addressing that issue themselves and were now operating on a fee system based on the service provided to a client. He adds: “For many small and medium fleets, some of the risk management processes may be daunting and their introduction will involve a lot of work and controls, but doing the basics is better than doing nothing.

“When we write policies we are not just looking at claims experience, but whether accidents are down to bad luck or judgement. A good underwriter will be trying to find out whether an incident was bad luck or the company could see it coming and didn’t react. If a fleet does not do the basics they will not find us very accommodating, but if an incident was unfortunate we will look favourably on them.”

Some fleets have looked to self-insure in an attempt to contain or reduce costs but, argues Mr Edwards, such a move is invariably false economy. “A small minority of large fleet operators self-insure, but it is within a total risk management environment otherwise such a move is very cost inefficient,” he says. Another major fleet insurer, AIG Europe, has established a policy called Fleet Protector through which independent total vehicle risk management company Risk Answers undertakes twice-a-year fleet assessment and risk management reports.

AIG Europe says that companies that pro-actively manage their fleet by implementing risk reduction measures will be rewarded with controllable claims costs. AIG Europe senior underwriter Guy Fraser says: “We want to reward well-managed risks and to do that we first need to know the real-life risk level. That is why we have engaged Risk Answers to carry out bi-annual fleet assessments. Their assessors will talk to company management to discover where the risk problem areas are in relation to the fleet and then analyse working practices and find solutions.”

Jeremy Hay, Risk Answers’ Chief Executive, says: “Some fleets will become uninsurable unless they take action to manage their risk exposure. Pro-active risk management in conjunction with expert help and analysis will make the difference.” Last September, Zurich launched a new Road Awareness Programme in conjunction with Drive & Survive, a long-time driver-training provider to the insurance giant. Following an initial on-line individual driver risk assessment recommendations will be made as to future requirements which may be road or classroom-based.

In a bid to encourage fleets to “introduce the basics” Norwich Union is shortly launching a new toolkit initiative designed to give all their fleet customers access to practical risk management advice. One thing is certain – in an increasingly litigious society and a fast-growing compensation culture, injury awards will get bigger and bigger. Therefore, says Mr Edwards: “It is in the interests of both ourselves and our customers to minimise their risks.”