On the buses.

- Insurance Age staff
- 17 Sep 1999
- Indicative reading time: 3 minutes

Bus and coach insurers are managing to push through some significant rate increases. However, Steve Banner says this good news is offset by an increase in fraud and in claims costs.

The massive upheavals in the passenger transport industry over the
past 15 years mean that most bus fleets are now in the hands of a small
number of large companies. Stagecoach and First Group are two of the
best-known and biggest.

Big operators tend to treat insurance almost as catastrophe cover, and
fund many of the claims they face out of their own resources - claims
handling tends to be outsourced. City-centre accidents tend to occur at
low speeds, and big operators usually have their own repair shops that can
fix the damage.

Crowe, a long-standing, leading player in the bus and coach sector - it
reckons to insure one in three of all the buses in the UK - reports that
some bus passengers still try to take its clients for a ride by faking
whiplash and other personal injuries.

"Spurious personal injury claims continue to materialise, and are more
endemic in some parts of the country than in others," says Brian
Chapman.

One of the best-known experts in bus and coach cover, and formerly
managing director of broker Chapman Stevens - the bus and coach specialist
recently acquired by Simon Brooke & Partners - Mr Chapman is now director
of Crowe Underwriting Services (CUS).

"These claims fall into patterns," he continues. "You can get a spate of
them from people living in the same street, and even using the same
solicitors. Crowe and the Lloyd's syndicates will contest dubious claims
vigorously," he warns.

"They're being looked at more closely, and action will be taken if there's
a sniff of something fraudulent," says Martin Ecott, director of broker
JLT Corporate Risks. He adds that it is too early to say what impact the
Woolf reforms will have in the personal injury arena, but stresses that
insurers and operators must have systems in place which will allow them to
respond to the timetable Woolf lays down.

Risk options

Mr Chapman's aim at CUS is to give provincial brokers, who may be offered
risks by local operators, an alternative avenue to place business rather
than resorting to Norwich Union or Cornhill - the two major composite
players in the sector. It will probably be coach rather than bus
business.

"80% of coach operators in the UK run less than 10 vehicles, and they
often want to deal with brokers in their local community," he states.

Minibus owners - schools, sports clubs, charities, and so on - can also
provide a useful source of revenue for local brokers. With packages
underwritten by Norwich Union, MiniBusPlus is the best-known player, but
it is not the only one. Broker Pound Gates offers policies underwritten by
Ensign under the BusTop and KiddiBus banners.

A well-run firm with a dozen, mostly modern, coaches and a respectable
claims record, would pay a premium of between £1500 and £2000 on each
vehicle, estimates Mr Chapman. Bear in mind that a modern, air-conditioned
coach designed for long-distance work can cost around £200,000.

"The customer is likely to take out comprehensive insurance, although he
may favour cheaper third party, fire, and theft cover for his older
coaches at typically two-thirds of the price," says Mr Chapman. Broker
commission varies considerably, but 10% to 12.5% wouldn't be unusual.

"Many coach owners still take a £250 accident damage deductible, and most
insurance experts agree that this is too low given the value of their
vehicles. Excesses are in fact gradually creeping up to £1000 or even
£2500," he observes. Passenger baggage and personal effects cover is
usually limited to £500 per person, with typically a per article limit of
£150 and a £15 excess.

Coach claims involving accident damage are far rarer than bus claims,
however, they can be three to four times the size, says Mr Ecott. "Coaches
are more expensive to repair, and they're usually travelling more quickly
when the impact occurs," he observes.

Some coach owners do their own repair work in-house, and if they've taken
a high excess, they may not file a claim. Coach theft is unusual, and when
it does happen, the vehicle is usually recovered.

Coaches do not generate the steady stream of injury claims produced by
buses, but when accidents do occur, the sums involved can be enormous.

That is why the nature of the work the operator specialises in can be a
vital consideration when rating the risk - this is information the broker
needs to provide.

If they have not already done so, the UK's 4500 bus and coach operators
may be encouraged to shoulder higher deductibles in view of the rate
increases now being imposed by insurers. "10% is the minimum we're
seeing," says Peter Gomersall, a director of broker Belmont
International.

"There's been a major hardening of the market over the last six months,
and this will continue," says Graham Baker, senior underwriter at
Cornhill.

"The big personal injury claims are getting bigger, and insurers have to
build up a fund to meet them."

Containing increases

"Bad risks could see their premiums rise by 100% or more," predicts
Richard Green, business motor market support manager at Norwich Union. If
customers want to contain these increases, they will have to implement
risk management measures. They can involve everything from introducing a
driver training programme to issuing drivers with cameras and showing them
how to take witness statements if an incident does occur. Such evidence
could prove invaluable if a big personal injury claim is filed.
"Responsible operators may also benefit from no-claims bonuses," Mr Green
adds.

"Coach owners can make a big difference to the premium they pay by
electing to pay for the replacement of damaged windscreens themselves," he
advises.

A coach screen can cost £1500 to £2000.

A careful analysis of claims figures should reveal the nature of the
accidents that are occurring, and which employees are the most
accident-prone. But one problem bus operators, in particular, face when
attempting to improve driving standards is the high turnover of drivers.
"Bus driving is a stressful and poorly-paid occupation," observes Mr
Ecott.

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