Delivering great fleet service

Rises in motor fleet premiums are set to continue for the foreseeable future and, when taken with the push to improve the nature of fleet risks and potentially self-insure larger chunks of them, there is a lot of work for brokers to sink their teeth into.

Examining Deloitte's latest commentary on the commercial motor market, it is plain to see that insurers can no longer afford to bolster poor underwriting performance with reserve releases.

In 2007, Deloitte says that the commercial motor market had an operating ratio of 114% when the impact of reserve releases was stripped out of the figures. Even against a strong financial and investment backdrop, this is not sustainable on a long-term basis and in today's environment there simply is not the financial fat on the bone to prop up poor loss ratios.

Many of the larger insurers are looking at single-digit rate rises in their motor fleet rates and are also keeping a keen eye on the risks that they are prepared to take on.

Andrew Fletcher, commercial motor underwriting manager at Groupama, comments: "The book has not been profitable for the last few years and we have been pushing increases through for the last 12 to 18 months." Fletcher says that the insurer has lost up to a quarter of its fleet customers at renewal but says new business wins and rate increases mean that the overall book is holding steady.

There is a similar story coming from other insurers and Roger Ball, head of commercial motor at Allianz, adds: "You have to be prepared to sacrifice business."

However, while the trend is for premiums to increase, there remains sufficient appetite in the market from newer entrants to offer opportunities for brokers and their clients. Speaking to PB, Paul Moors, chairman at Bollington Group, says: "There is a slight hardening of the market from the main composite type of insurers but there are still some maverick quotes out there and the differential on new and existing business can be up to 10%."

The liquid premium climate clearly provides brokers with opportunities to move clients around to ensure that they are receiving the best deal, yet there is also growing pressure on them to help fleets improve the underlying risk.

Mike Smith, commercial motor technical manager at Aviva, is very clear that it may not always be possible to keep a lid on rates for customers for long. He explains: "Businesses shopping around may unearth a marginally better deal but sooner or later everyone's price goes up."

Risk and reward

However, he is equally adamant that many fleets are holding the answer to a better premium in their own hands: "Companies need to be clear about the direct effect that claims have on premiums paid. If firms can prove a reduction in their levels of risk then this is something to make clear to the insurer, which is more likely to reward a customer able to demonstrate a commitment to risk management."

This places the onus on brokers to ensure that the risk management message is received and understood by clients, as well as to offer them the practical expertise needed to make the improvements that will enhance the nature of the risk that they present.

This is likely to push brokers to seek help from third parties and Fletcher says that this should to strengthen the working relationship between brokers and insurers in the fleet market.

Smith comments: "The last time rates hardened, there was a move from brokers to work a lot harder with insurers and I see no reason for this not to happen again."

However, it is not just insurers that brokers are seeking out for expert help in managing fleet business and Tim Rankin, managing director at WNS Assistance, says that the company has seen growing interest from brokers looking to improve the level of service they can offer clients.

"Brokers are either looking to up-skill or partner with someone like us. We are talking to more brokers than we were 12 months ago and they have to be more imaginative and effective in the solutions they come up with."

Over the years, many fleets have lost a significant amount of control over their risks as they have lowered excesses in the softening market. Where excesses are low, bills are absorbed by the insurer and there is little interest shown by companies to understand where their fleet's risks are most severe, what is driving them and how they can be mitigated.

In seeking to keep premiums down as rates now harden, many firms are looking to increase their excesses and Rankin says that this may pay dividends long into the future: "If the fleet sees more of the accidents and information then the broker can do a better job."

Rankin says that third-party firms - those contracted to work for the fleet company - like WNS Assistance are better placed to give full claims data relating to the type, location and frequency of accidents being recorded.

By offering fuller visibility on claims data, he believes that third-party claims handlers can provide brokers with the information needed to help fleets manage and reduce their risks effectively.

Unsurprisingly, not everyone shares this point of view. Ball says that Allianz is ready to give as much data to its fleet policyholders as possible: "What information we can meaningfully pull out of our claims system, we do." He also says that the insurer has teamed up with the Royal Society for the Prevention of Accidents to help offer discounted access to advice on risk management in addition to running free workshops and providing online help and literature.

Similarly, Aviva offers online risk management tools and these are tools that brokers will be keen to make the most of as they seek to help clients offer a better risk to underwriters.

If brokers are to help the growing number of clients keen to increase excesses and self-insure part or all of their fleet risks, successful risk management will be imperative.

Effective management

For firms accepting greater risk, there is no financial benefit if all they do is shift risk from their insurer to their own balance books. However, meaningful financial benefits come for those able to improve their claims performance. As Moors comments: "There has to be a programme of risk management to enhance the risk."

There is a huge range of options that brokers can offer clients to help them improve their fleet risks, yet for such moves to be truly successful it is important that the company is prepared to commit to long-term culture change.

Can firms reduce the number of journeys their drivers are making by altering their working practices and process? Are deliveries made in the most efficient way? Could video conferencing be used? Could alternative modes of transport be better incorporated into working schedules? All should be considered.

Firms can also make a significant difference to their overall claims costs by following well-structured processes in a timely fashion, allowing claims handlers and insurers to manage the claim and avoid the inflated costs that many have blamed on the intervention of credit-hire firms.

Moors says: "Insurers and brokers need to make sure they take hold of claims where the client is at fault but has not suffered damage - before others do." This means establishing solid reporting procedures, even for incidents where drivers may not think that there is a problem.

At the moment, premium rises are only matching the growth that has been seen in claims costs, according to a number of the insurers interviewed. However, this is not going to be sufficient to improve their underwriting performances or deliver profits.

As such, there is little doubt that future rises will be forthcoming, especially given that costs are expected to continue rising in the face of ongoing disputes with the credit-hire industry and legislation is continually evolving, as with the Ministry of Justice reforms for personal injury claims.

Churning business between carriers may help brokers to keep a lid on premiums in the short term, though for those really looking to help clients, understanding their risks and helping improve them into the future is where they have the biggest opportunities to add value.