hello again and good day to you, welcome
to lecture number 13, this is fleet life cycle stage number five, risk management.
in the previous lectures we’ve taken you through vehicle selection not to mention
the fleet policy, after procurement was finance management now that you have financed
your vehicles you need to take care of the risk. firstly you identify the risk,
evaluate the risk, which means you decide exactly what you’re up against as far as
risk is concerned. you control the risk after that, through financing it which
could be done in two ways you either transfer the risk to a
broker who is using an underwriter for example to underwrite your risk or
retain the risk through a self insurance fund within the company. I will tell you
how that works shortly, you don’t want a situation where
you’ve just purchased your vehicles through whatever financing method that
you’ve used all of a sudden you find yourself with an insurance, you’ve just
got comprehensive insurance let’s call it that for now so how does that happen
there’s two ways that insurance will work, just to simplify the discussion you
will either underwrite through an insurance company or via their broker or
even use a self insurance fund, so that self-insurance fund is made up
of calculations per annum over a four year period whatever the case is
normally done over 12 months initially your total insurance risk profile is put
on the table and is analyzed to say going forward what are you likely to
suffer as far as insurance incidents are concerned then you quantify that in two
figures if for example you have 10 vehicles and those vehicles are worth a
million rands you could maybe put aside 100,000 rands so that each and every time
you have an accident or a bumper basher or a windscreen replacement you just
draw from the fund so that’s basically how a self fund works and let’s get to
what types of vehicle insurances are there. firstly you could be insured
comprehensively which means that for every incident and occurrence that you
may ever think of you’ll be covered comprehesively,
even if someone is calling you and trying to sell you insurance this is
what they would be offering you because this is what is most needed for most
companies or even individuals. Fire and theft excludes damage of own vehicle in
an accident especially by your own cause or by your own fault and it also
excludes third-party damage so if you had to veer off the road have an
accident or one of your drivers veers off the road has an accident, car rolls,
is written off you’re not covered for that own risk which is having an
accident so in this case you would not be covered for an own accident so you
have to find a way to get that vehicle repaired or replaced so you’ve lost. on
the third one, damage to third party, fire and theft, this one includes own accident,
an example here would be that if you hit a third party you are not covered for
that you would have to foot your own bill to repair your own vehicle. you are
covered for third party, damage to third party but you are not covered for your
own damage so that’s also a risk. you need to manage utilization of the
vehicles. the more the vehicles are out there driving even for things that are
drivers personal issues the risk is still yours so you need to minimize that
risk so you need to manage utilization that vehicles are used for the purpose
which they are meant for which is doing company work so utilization is very
important so you could have vehicle tracking which actually analyzes what
the vehicle does during the day from the time it starts, where it went to, how many stops it made up to the time it returns to the yard or to the premises, you’re
managing utilization there because then, not only that you are exposed to more risk
there but there’s fuel, there’s wear and tear there’s maintenance that by this implication
you’ve got additional costs that need to be looked after at end of the day.
accident management is where you actually analyze each and every incident
that occurs with the vehicles that are insured so that you actually keep a
record, could be an accident, could be a driver reversed on a pole, could be a
third party hit your driver, so these need to be recorded and
and listed according to each peril or incident category or occurrence so you
need to understand that in the month you’ve had three driver hit third party
or two third party hit your own driver or hit a pole or veered off the road or vehicle rolled and so on you need to list them like, that, that’s accident
management. the rest of the details that relates to accident management is going
to be discussed a little bit later on I was just bringing this up just for just
for understanding at this point in time. driver license management is important.
have you ever come across a situation where, (you may have) where a driver had an accident or almost had an accident or has been stopped by traffic cops gotten
a traffic fine only to find out that your drivers driver’s license expired
two months ago that is a big risk for your business especially in cases where
there was a fatality in the accident that which he caused and that liability
comes straight to either him but because the vehicle is registered in your
company name that liability comes straight to you, it is your
responsibility so you need to make sure that driver licenses I inspected and
drivers are kept abreast as far as the expiry of their license or so they can
keep renewing them. you also need to have a process whereby you manage breakdowns
and roadside assistance. this could be either through your own internal call
center or an external service provider who’s been appointed to look after
things like this who could be called 24/7 to respond to breakdowns and
roadside assistance, again it goes back to that as well, roadside assistance
could be as a result of recovery from an accident so how do you recover from
accident so you need to cover that loop there fraud and theft management is also a
serious issue that needs to be given attention as far as risks are concerned.
traffic fine management is also an issue where you may have a proxy in your
company who actually takes care of all that has to do with licensing of
vehicles and actually takes ownership of the environment where vehicles are not
licensed, are not roadworthy, there are traffic fines, to an extent that when
authorities come to the company with warrants of arrest
of traffic fines that have not been paid he could even be arrested so that’s very
important that when drivers get traffic fines wherever they are driving for
whatever reason they disclose to the company and they know the process within
which these traffic fines are managed the same with licenses, driver management
interventions is where you have continuous improvement interventions
that assist drivers to be better drivers in the company, to be more responsible, to
be more aware of safety issues, to take more precautions when they are driving.
this is something that shows that you you care as the owner of the vehicles
as the owner of the fleet as their employer so you need to have
interventions to assess drivers. abuse and vehicle misuse is actually a
serious one and can be twofold, one, drivers can really be misusing vehicles
which needs to the controlled where, from when they start them the harsh starting,
the harsh acceleration, the harsh driving, the harsh cornering, and everything is
just you know it’s just so terrible that, does this guy really care about these
vehicles, he probably doesn’t and you should not be having drivers like
that in your fleet. that’s the first point now, that abuse and misuse of vehicles
means that you’re going to be paying more for fuel, for maintenance, wear and tear.
the second point is that, it is actually quite possible that through negligence
of the fleet supervisors in the fleet department that what was reported by a
driver at some point in time was actually neglected. the driver may have
said that this vehicle is emitting smoke from the exhaust pipe, he may have
said that as an extra clicking noise in the engine somewhere he doesn’t know
what it is and then you continue to say to the driver, just do this one trip or
these two last trips until the end of this week and then all of a sudden you have got a gearbox collapse. it is not his fault, he has been asked to use a vehicle
that was giving signs that something’s wrong with it so you need to guard
against that. let’s take a look at how financing risk through an insurance
underwriter is done. here we will mostly talk about insurance costs per vehicle
you may have come across a situation where you go into a dealership
pages of vehicles even on an individual capacity even five or ten vehicles as a
company you sit in front of the sales representative guy at the dealership, he
also says to you, do you have insurance? then you say no no I don’t have you can
organize me I can tell you now that is the most expensive insurance you’re
gonna pay for if you are not involved in the sourcing of that insurance, it is the
most you are gonna pay for. always source your own, always look for your own. here’s a scenario, a vehicle is a hundred thousand rands and his answer to you was that okay
you’re going to pay five hundred eighty three thirty three cents per month, now if
you multiply that by 12 that is seven thousand, that’s all he’s told you right
there, the most important part which is there he will never tell you even if you
had gone to the insurance company or their broker, they will never tell you
that part because that’s the most important part that is where their
margins are sitting that is where you get ripped off, so, how you need to
understand that is, that part is not important, this is what is important
you’ve just been given that 583 so just from calculations insurance rates will
range from between two percent which is for the wealthy and affluent with lots
of high net worth assets to about eight. sometimes they’ll move up to about
fifteen percent which is very expensive in this example you actually take the
hundred thousand which is the value of the vehicle (retail price of the vehicle)
you multiply that you know to keep searching
you multiply by 5 percent 6 percent 7 percent 8 percent until you get to that
figure which he gave you as your annual premium or your monthly premium after
calculating it in that example there, now you know the seven thousand Rand is a
product of the 7 percent so you know the rate you’re being charged is seven
percent that is expensive you know you could be somewhere around 4 percent five
percent especially commanding a fleet of about 10 15 with an insurance history
that’s not so bad, so, if we consider 7 percent to be a high
rate try and get more prices from other insurance brokers and underwriters, and again after you do that the insurance company may turn around
okay 333 what they have done very is they’ve given you a four percent rate,
again with the same calculation just take that amount which is a retail price
of the vehicle multiplied by four percent or five percent and so on and so on until you
get to the four thousand divide that by twelve you get the monthly premium so
when you get that figure then you know exactly that I’ve been charged four
percent which is not a bad rate at all so you may accept that depending on how
rates work in your country in South Africa does a very good rate just
imagine saving 3,000 rands per annum per vehicle and you got 50 of them, that’s a
hundred and fifty thousand rands just on insurance what about fuel, what about
maintenance, what about tires, what about training drivers, driver interventions to
get them to drive your vehicles better this is an exercise calculate the
insurance rates for all your vehicles and if it is not justified find an
alternative, an alternative broker or insurance underwriter. okay put it simple
here is another thing that I need to share with you you’re loss ratio should be
below 10 percent of capital asset value if you have 10 vehicles worth a million
rands you need to be spending less than 10 percent of that capital asset value
to fix those vehicles for the accident they’ve had or whatever they have suffered, but a problem arises where if you are self insured and you have put a hundred
thousand on the side in the fund for insurance and you suffer one big loss
like one vehicle stolen and you need to replace it, it’s a hundred thousand
you’ve lost ten percent already what do you do with other repairs that will be
needed on the other nine vehicles. a self-insurance fund may not be the best
for companies where there’s smaller fleets it is better if you have a much bigger
fleet and in this one you need to understand that the fleet manager has to
have an internal accident management and driver safety program. its benefit is
that it provides the company with administrative and cost control
assistance regarding entire driver management, vehicle loss and damage
claims process if we’re talking about the accident
management program what is it that needs to happen there exactly? you need to have it drafted as part of the policy so that you have a process in case there’s an
accident that happens. assisting the driver telephonically at the accidents scene. arranging the driver’s vehicle to be towed by a reputable towing company.
arranging driver assistance and emergency assistance at the scene of the
accident. requesting and reviewing repair quotations for correctness. do not just
accept quotations, a quotation that was given to you initially at assessment
stage by the prospective repairer may be different from the final invoice that
you get. directing the vehicle to an approved panel beater.
communicating all necessary information communicating all necessary
information internally if costs need to be passed to staff. at fleet policy stage
we discussed how important it is that all costs that relate to driver if it’s
fuel if it’s maintenance and in this case to repair a vehicle it could be an
excess that is due to the driver because it is their own fault that the accident
happened so that’s got to be documented in the policy you cannot surprise the
drivers all of a sudden he finds himself having to pay a hefty excess because
they’ve had an accident. if it’s not in the policy then he cannot pay which is
why it’s important there should be a policy. the next point is that you need
to liaise with insurance companies or company fund manager if you are self
insured for the process that needs to be taken and progress thereof after a
vehicle has been taken in. arranging courtesy or hire a vehicle for driver to
continue be mobile, liaising with repairer to ensure that the work is done
correctly, cost efficiently and as quickly as possible. this is very very
important if you have chosen vehicles that are not supported as far as parts as
far as maintenance is concerned if you chosen vehicles that are not so
popular in your country for whatever reason you would have used to choose those
vehicles at selection stage, but the point you face here is that that the vehicle has had an accident needs to be repaired and the repair phase there are no parts and it’s
going to take six months to repair the vehicle, you are in trouble in this case
because you could have bought another vehicle with more availability of parts.
it’s also important to record the accident and circumstances appropriately
in the insurance database, so you need to have a database and understand what
exactly happened, you may have different occurrences or incidents that resulted
in an accident you also need to understand that these need to be listed,
all of them what are you claiming for? what has been reported? is it a
windscreen? or a driver heat third party? or hit an animal? and so on and so on you
can’t be having driver hit third party appearing three times per annum for the same driver he either shouldn’t be driving for your company or should be trained so
that he drives better so you need to have an understanding of those repeat
claimants as I refer to them so when people start having claims over and over
again there’s an intervention from the company that’s needed.
following up on payment of claims and recovery from third party is applicable
so the accident management program needs to cover that clearly you may be shocked
that if your driver has had an accident by no fault of his the insurance company
may may ask for an excess while at the same time they are pursuing the third
party who hit your driver, they may not always tell you that the excess that you
had paid has now been recovered now its three months or six months later that
excess has been recovered from the third party so you need to keep in touch with
them make them aware that you are fully aware that you are not responsible for
that excess it should be paid back to you it is due to you. now on driver
safety you need to have a fleet policy that details unacceptable driver
behavior include such issues as seat belt use, cell phone use cell phone use
is the biggest killer today it is the biggest contributor to road crashes.
driving education is important and training programs. enforce consequences
to policy violation. drivers should sign related policy documents we’ve
already spoken at policy we discussed how important it is that drivers sign
the policy. you need to develop a risk management program that identifies high risk drivers, tracks driver behavior and provides safe driving training and
education. encourage, recognize and reinforce appropriate safe driving
behaviors with rewards and incentives. establish and enforce an accident
reporting and investigation process. your company policy should clearly guide
drivers through their responsibilities after an accident, they need to know
exactly what they need to do after they have had an accident, establish an
accident review committee all accidents should be reviewed to determine cause
fault and preventability. inform drivers of their responsibilities after an
accident if there’s payments thats due to them or if they cannot drive for a while
investigation is going on that should have been listed in the policy anyway
use a pre approved repair shop to expedite the claims process. benchmark
accident management programs with such metrics as average cost per repair, it’s
important that this is done in your in your own currency to understand exactly
how much accidents are costing your company and also you need to have an
understanding of average repair turnaround time for certain kinds of
damages in vehicles and average rental days per collision claim so for every
accident that has been there that requires that there’s a rental that goes
out in order to keep the driver mobile there’s a cost to that so that needs to
be quantified and put in rands and cent terms. third party claim efforts can be
measured via metrics on costs actually recovered per claim.
I’ve mentioned this point earlier on that it is important to follow up on
third party claims and what their responsibility is and try and recover
from the insurance underwriter whatever you may have paid as a result of that
accident and at this stage I can safely say that we’ve actually broken down what
risk management contains and how it needs to be managed in your company
going forward and how it needs to be planned for that matter and executed so
this is all I had in this lecture and I am quite sure that now you understand how
insurance works I’ll see you in the next one thank you very much