Fuel for thought in the motor market

The motor market has boosted its results in recent years with a series of considerable reserve releases. But while there appears to be scope for more, it is becoming clear that if the transport industry wants to continue to benefit from highest grade security, it must be prepared to develop a more sustainable, long-term approach to insurer relationships.

This issue is made all the more critical by the enormous challenges now facing the transport industry as many traditional, family-run bus, haulage and other transport firms are absorbed into larger regional, national and global organisations.

Hit by the double whammy of the fuel price hike and significant increases in wages and rents, recession-like conditions have been a reality for many in the past year. Such cost issues have been further exacerbated by soaring prices for high-end trucks and coaches, and by large increases in fixed capital costs.

This in turn has meant many operators now have to manage the debt financing costs of significant levels of vital business investment in an ever-hardening credit market.

Against such a background, brokers and clients are inevitably looking to insurers to provide high-quality security to mitigate the substantial risks they are facing.

This can be achieved with those insurers offering comprehensive multi-line cover via a partnership based on active risk management – but only if there is mutual acknowledgement that realistic pricing is vital to the maintenance of long-term, secure insurance cover.

As underwriters, we need to continue to work ever more closely with brokers to understand the needs of our clients’ businesses.

A focus on successful risk management strategies is undoubtedly key. Strong co-operation with clients and brokers makes it possible to reduce claims and develop risk management programmes that engage the workforce. Indeed, Ulsterbus, the main bus operator in Northern Ireland, recently reduced its claims by 32% by asking drivers to identify and report driving hazards and get actively involved in reducing the risk of accidents.

However, insurers and brokers can only be asked to consider the benefits of risk management if they are being offered an insurance product that will deliver when they need to make a claim.

This requires empowered underwriters and claims managers with the experience, skills and training to understand the complex needs of each transport operator.

Many such businesses routinely work across international borders and so require a more complex level of support; others may want multi-line responses and therefore need underwriters who are able to deliver on this front.

This reflects that while motor has a proud tradition as a standalone product, bringing together cover for all risks – from motor, property, employers’ liability to such business protection products as trade credit insurance – can offer a more secure and efficient result for many clients.

Looking ahead, the fact that motor pricing levels have been supported by reserve releases in recent years means the status quo is unsustainable if current claims levels persist.

Clearly, insurers need to continue their focus on the business basics of effective underwriting and risk management.

But, equally important, they only will be able to maintain pricing at an affordable level if there is real recognition of the need to move to long-term partnerships centred on value over time, and not just today’s “best” price.

We all need to take note of this reality as we look ahead to 2009 and an economic climate that has once again highlighted the importance to policyholders of securing the highest quality insurance security.

Matthew Crane is managing director, motor, of QBE European operations.