Once seen as a perk to attract and retain key members of staff, employers are now beginning to discover that there is a lot more to consider than an employee's ego when running a fleet of company cars, finds Sam Barrett
Increasing health and safety requirements, as well as additional pressures, such as increased liability claims costs, fines resulting from non-payment of London's congestion charge and the implications of the Greenaway Report, mean fleet operators are now facing additional administration requirements and escalating insurance costs.
To address the issue of rising insurance costs, insurers are increasingly promoting risk management initiatives to fleet managers. "Risk management can help to keep claims costs down, which will help to curb premium inflation," says Simon Baker, commercial motor manager at Axa Insurance, adding that it will also mean significant improvements in road safety, potentially reducing the number of fatalities on the UK's roads.
Unfortunately, while awareness of risk management among employers running fleets is growing, the willingness to invest in initiatives remains low.
For example, according to Nigel Frost, underwriting manager for fleets at Norwich Union, 85% of the insurer's fleet book does not have a basic risk management policy in place. "Some segments of the market, for instance the haulage industry, have successfully embraced risk management," he says. "But, for others, particularly smaller fleets and those where there may be several departments responsible for the fleet, such as finance and human resources, this simply is not the case. Just getting someone to 'own' the problem can be very difficult."
Graham Johnston, director of intermediated motor at Royal and Sun Alliance, agrees. He says that where bigger fleets are likely to have a dedicated fleet manager and a huge budget to support any risk management programmes, for medium-sized companies it will often depend on the company's overall attitude to health and safety. "There is definitely a correlation between how a company is run and how it runs its fleet. Although different strategies are required, it is easy to transfer knowledge between the two areas," he explains.
Many feel that with the government getting tougher on occupational road safety, every fleet operator will have to start taking risk management seriously. Roger Ball, commercial motor manager at Allianz Cornhill, points to the government's road safety targets as evidence that it will be looking at ways to tackle dangerous driving. In 2000, the government announced its aim to cut the number of people killed or seriously injured on the country's roads. In particular, it said it would take steps to bring about a 40% reduction in the number of adults and a 50% reduction in the number of children killed or seriously injured. "While there have been some improvements in the number seriously injured, there has been hardly any change to the numbers killed," explains Mr Ball. "If the government wants to achieve these targets, it has a lot of work to do."
The fleet market is a specific target for government initiatives to achieve these reductions. Estimates from the Health and Safety Executive suggest that one-third of all traffic accidents - equivalent to 20 fatalities and 250 serious injuries every week - are caused by drivers at work. And, when looking at the impact on fleet, Lex Vehicle Leasing found that, over the course of a year, 66% of drivers were involved in an accident, with one in 45 requiring hospital treatment.
Although these statistics make alarming reading, legislation is already in place to ensure employers take a responsible approach to running a fleet. The Health and Safety at Work Act 1974 requires employers to ensure workers are not subjected to undue risk while at work, which includes occupational driving. It also requires employers to ensure other people are not put at risk by their employees' work-related driving.
In addition, under the Management of Health and Safety at Work Regulations 1999, employers must carry out risk assessments on a regular basis to safeguard the health and safety of employees and anyone else who may be affected.
Although this legislation already places the onus firmly on the employer to consider the safety of the employee when driving for work, the requirements will be tightened up over the next few years. "Legislation will force employers to take notice of risk management," says Mr Frost, pointing in particular to the corporate killing laws (see box, left) that will now, reportedly, be published as a draft bill before the end of the year.
Driving licence breach
Other proposed changes will also make it easier to enforce statutory health and safety requirements. From April 2005, police will take details of the purpose of any journey when completing road traffic accident forms.
"The police are linking more closely with the HSE. For example, Sussex police are notifying employers if there is a driving licence breach on a work-related journey," says Mr Ball.
To avoid falling foul of the law, a wide range of risk management programmes are available for fleet operators. These cover a wide range of training aids and assessment tools, as Gavin Jones, ProAct and rental services account specialist at Interleasing, explains: "Driving training is common but an employer should also consider implementing regular checks on driving licences, pre-employment checks or accident investigation and interviews to help them understand the risk in their fleet."
Whatever type of risk management programme is used, it must be appropriate.
Mr Jones adds: "There are all sorts of driver training programmes - defensive driving, commercial driving, heavy-goods-vehicle driving - so it is essential you identify the people who need to take these courses and the type of course they need. Taking courses can also be regarded as some sort of punishment, so it is worth getting top-level buy-in for any driver training programme."
Targeted risk management can identify much cheaper solutions too. According to Mr Ball, the claims pattern of one of his clients revealed a high incidence of claims for damage resulting from reversing in its depot. "We encouraged them to look at ways to address this, which led to them painting a bright yellow line in the depot to prevent employees reversing too far. This reduced their claims significantly," he says and the cost, of course, would have been negligible.
Insurers stress that fleet risk management must not be regarded as a short, sharp shock either. "Every year you need to revisit these areas as the effectiveness can wear off," says Mr Johnston, adding that the introduction of new legislation offers an ideal opportunity.
Many fleet insurers, in particular the larger ones, are keen to help employers source risk management. For instance, Norwich Union has recently launched a risk management CD-ROM, Driving at Work, which it is distributing to all its intermediaries to give to clients. Many also offer free advice.
Additionally, where risk is identified as greater than average, some insurers will proactively take steps to address this. "If a fleet is not running well, then the insurer will sometimes ask that they put risk management in place," says Kevin Kidby, motor broker at Opus.
He continues: "Some will also help towards the cost of any initiatives put in place, perhaps giving back 50% of the cost if the spend is significant enough to improve the risk." Mr Kidby adds that, usually, an insurer would expect a minimum spend of £6000 before they would consider contributing towards the cost. Additionally, not wanting fleets to benefit from their investment and then move to another insurer, they usually stipulate a short time frame in which the initiative must be implemented.
Brokers are also getting involved in fleet risk management. "We offer our clients advice on reducing risk across their fleets as this can play such an important part in controlling their premium," says Mr Kidby, adding that this is often in conjunction with the services provided by the insurers.
Opus has also launched a number of services independently, including an accident pack it recently put together. Costing £6 per pack and designed to sit in the vehicle's glove compartment, it contains a disposable camera, an incident pack and a pen. "After an accident, the driver sends us the camera and we put the photographs on a computer so the insurer can assess the claim. This helps to simplify and speed up the claims process," explains Mr Kidby.
As well as reducing claims costs and premiums for the fleet manager, there are other benefits for insurers in taking a proactive stance on risk management. Mr Frost believes that by working with an employer in this way it helps to build a stronger long-term relationship. "We are not here to churn our book," he says. "Although the risk management message is still not there with every employer, we are pleased with our retention rates - 80% of the book has been there for five years or more.
"There are still companies that move on price alone but this is a short-term approach and I strongly believe a time will come when such an attitude to risk management will mean no insurer will want them."
CORPORATE KILLING: POTENTIAL CONSEQUENCES
Duty of care legislation, which makes the employer liable for the safety of the employee while they are driving for business, already exists as part of the Health and Safety at Work Act 1974 but the government proposes to introduce new legislation for corporate killing to make it harder for employers to dodge their responsibilities.
Under the current duty-of-care regulations, it is only possible to prosecute a director if they are directly responsible for the accident; for example, if a sales director expected an employee to drive excessive distances in limited hours as part of their job they could be held responsible for an accident that then occurred as a result of tiredness.
Mike Waters, head of market insight at fleet management company Arval PHH, explains that the corporate killing proposals will tighten this up, however: "The proposed corporate killing legislation would enable a company to be prosecuted without having to find a negligent individual. This will mean it is essential employers take risk management seriously."
A draft bill has already been delayed several times due to the complexity of the law in this area but the Home Office has announced it will finally publish one in November.
FLEET MOTOR AND THE GREENAWAY REPORT
Although the Greenaway Report was commissioned to address the problem of uninsured drivers, its recommendations have ramifications for fleet operators. Recommendation 17, in particular, could cause serious headaches.
This requests that to ensure the motor insurance database can be used effectively, every motor insurance policy should contain details of all the insured persons who drive each and every vehicle they are insured to drive.
This is not necessarily straightforward for fleet operators, as Graeme Trudgill, manager of technical services at the British Insurance Brokers' Association, explains: "If you are operating a fleet of 40, 000 cars and you have a high staff turnover or you do not dedicate each vehicle to a particular person, then this recommendation would result in an onerous amount of administration."
The Motor Insurance Compliance Action Board is currently reviewing the recommendations to determine how they should be implemented. "We are pushing for simplification on this point and a consultation on how this recommendation could be adopted by fleet operators," adds Mr Trudgill. "We would advocate the retention of unspecified (blanket) certificates and open driving policies in these circumstances."
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