DRIVING INTO THE UNKNOWN

The benefits brought to the heavy motor industry by increased demand and technological advancements have been offset somewhat by rising costs and staff and vehicle shortages. For brokers, it looks like the same game – but today there are different rules.

BY MARTIN WANLESS

The heavy motor industry has undergone tremendous change over recent years. Some good, some not so good. And it’s created an evolved set of risks for businesses to tackle.

On the positive side, increases in productivity and advancements in technology have brought about greater efficiencies, as well as enhanced safety nets. On the other, rising costs and driver shortages have all but negated the benefits.

Over the past three years, we’ve seen an exponential increase in the number of trucks on the roads. The ecommerce model we all had to become accustomed to has meant there are more heavy vehicles on our roads than ever before – with estimates of a 50 per cent increase seeming accurate.

“Despite the disruption of the ongoing COVID-19 crisis, the transport industry has experienced significant growth, which is forecast to increase,” says Darryl Martin, Western Australia Manager at GT Insurance.

“In Australia, more freight is moved by trucks than by sea or rail. The growth in road freight transport is being stimulated by production and consumption demand. Changes in buying behaviour, such as online retail spending, and the frequency of natural disasters have put considerable pressure on road transport operators, and this is expected to continue.”

WANTED: DRIVERS

A key source of that stress has come from a shortage of drivers. As was the case in many industries, the pandemic prompted a career rethink for some, while border closures meant a new talent flow from overseas was stifled.

“Because of all the lockdowns, almost every transport company grew exponentially,” says Nick Dendrinos, Head of Motor Portfolio at NTI.

“There was an explosion, a huge amount of pent-up demand, and to meet that demand, transport operators had to order a lot more trucks and they had to put on drivers. However, I’ve never seen such an acute situation. We’ve always had a

The Benefit Of Technology

Of course, safety technology has become increasingly vital in reducing risk and helping manage driver safety over recent years. Nick Dendrinos of NTI shares a story of an incident that underlines just how critical safety technology is.

“A long haul driver was driving a truck that was fitted with safety technology – facial recognition, realtime fatigue monitoring awareness, that sort of thing. If you have a microsleep, which is a huge risk in long haul, it buzzes to wake you up.

“A young driver was doing a big run from Far North Queensland all the way down to Sydney. He had a microsleep, the seat buzzed and woke him up. He went into the side rail, but woke up in time and was able to really control it. It was an accident, but he didn’t roll it over.

“That particular driver said that if it wasn’t for the equipment that his transport operator put in their truck, he would have been dead.

“Subsequently, that person’s mother rang up the transport operator and said ‘thank you for saving my son’s life by putting this kit in the truck’.” shortage of drivers – the average age of a truck driver used to be 55, now it’s close to 60 years old, and it’s getting older.

“That’s created massive issues with regards to meeting the demand and getting skilled drivers in trucks. Not only is it incredibly difficult finding people, but to get them, you now need to pay them more, too.”

And, of course, that brings with it its own risks.

“Staff shortages have resulted in cases of incomplete contracted work, which can create company reputation risk,” says Fran de Sanary, Senior Risk Engineer at Zurich Resilience Solutions.

Martin says, “The skilled driver shortage and ongoing pressure on drivers present many potential risks. Fatigue and wellbeing issues of existing drivers, and employment of lesser experienced drivers creates safety risks for drivers, business owners and society. With constant demand, time pressures and supply chain disruption across every industry, access to maintenance providers, parts, new trucks and trailers is challenging.”

As well as needing to pay premium salaries to attract drivers, the inflationary environment we’re all living in is impacting businesses too – which has a knock-on effect on the fleet.

“Increased operational costs have resulted in price rises for end customers and vehicles being held onto for longer than desired, resulting in repair and maintenance risk,” says de Sanary.

Beware Of Rising Valuations

In addition to rising costs, a lack of vehicle availability is also at play. As anyone who’s experienced attempting to buy a new vehicle in recent years will testify, you could well be waiting for 12 months or more – and the same story applies here.

Of course, the impact of that is the value of second-hand vehicle increases.

“It’s a strange situation as we’re all used to driving out of a car yard in a brand new car or truck and it losing 10 per cent in value straightaway,” says Dendrinos.

“Who would have ever thought that we would see increases in values of 20-40 per cent? Actually, in some specialised heavy items, and even mobile plant machinery, we’re seeing 80-100 per cent increase of that value for a used vehicle.”

It’s a critically important point for brokers – after all, businesses in this sector rely entirely on their vehicles and machinery. If the declared value of assets isn’t in line with today’s replacement valuation, then there could be some serious problems come claims time.

Mixing Art And Science

For brokers operating in this market, it’s important to have strong conversations with clients about the huge changes the industry has gone through. The increasing availability and accessibility of data is crucial to inform those conversations.

Three Questions To Ask

1

How is the client managing their growth?

Businesses experiencing significant growth need advice –work with risk engineers to help clients understand the true risks they face and what they need to do to mitigate them.

2

Are assets protected?

Make sure insured fleet values are realistic and aligned with today’s replacement costs.

3

How can the program be tailored to the precise business needs?

By understanding operational triggers and the key drivers in the business, you can help tailor programs that will help safeguard the business.

“One of the most important focus areas is data, which helps clients to understand where costs are proportioned (insurance, fuel, tyres, repair and maintenance, service schedules and wages) and potential efficiencies for route,” says de Sanary.

“Data can also help clients understand worker and driver competencies such as their driving style and the dynamics of management communication. Information can come from vehicle telematics, fuel data or maintenance data. In short, data analytics is one of the new areas that fleet operators can maximise operational and environmental efficiencies.”

And, as always, it all comes down to people, says Martin.

“Brokers should spend time with their clients to intimately understand the multitude of challenges a transport company faces.

“Despite a client’s best efforts in managing risk, the human element cannot be ignored. Disciplined recruitment and maintenance practices, driver training, constant support and advocating the chain of responsibility has always been at the core of sound risk management.”