Truck Insurance

Risk management: On the frontline


According to SheqAfrica, Africa's largest Occupational Health and Safety, Environment and Quality Management resource, 48% of vehicle collisions on Durban's N3 highway involved heavy vehicles. Almost half of these accidents were single vehicle accidents, and can be largely attributed to driver fatigue, unsafe following distances, poor visibility, and poor and/or insufficient tyre and brake maintenance.

Fleet maintenance is one of the largest expenses for any logistics company, especially with the current price of imported parts being so high. This has caused some fleet owners to delay maintenance on their trucks or to encourage their drivers to haul freight over longer periods of time to mitigate these rising costs.

Organised crime on the N3 is spiralling out of control, with the battle lines drawn between highly skilled telematics/insurance and private investigation professionals versus very well organised crime. To stay one step ahead, logistics companies need to be up-to-date with developments and new technology.

To find out more, Gregory Simpson caught up with knowledgeable national manager for Regent Commercial Vehicles, Wayne Rautenbach, who knows a thing or two about insuring large fleets of trucks, from his experience as a leader in one of SA’s premier insurance companies, Regent.

What is the importance of insuring your fleet properly in 2016 with the sort of turbulence we are seeing on the highways in terms of hijacking?

The importance of insuring your fleet properly is very important for the sound running of a business.  Should you, for instance, were to try and cut corners and you incurred losses that were not covered, it would probably be a severe loss or an unbudgeted cost on your balance sheet. It could even mean the closure of a smallish fleet that couldn’t carry the cost of an uninsured risk, so the answer to that is, an uninsured fleet could be absolutely disastrous for any logistics business.

In your daily business how many companies are actually running uninsured fleets in SA?

I’d say most logistics companies have some form of insurance even if it’s just for the goods on the back, but the fleets that are running newish trucks have to be insured because of the structure of finance, by either a finance house or by the OEM. Someone with one or two trucks who is just doing general rubble removal or something like that, you’ll probably  find those guys are not insured, but people carrying goods for reward would normally be insured. 

Do you find it’s the newer trucks or the slightly older trucks that get targeted the most by syndicates?

For hijacking, because it’s such an organised business, they are targeting the more high value goods and they are targeting the parts with the consumable goods. These are normally carried by your logistics companies that operate in the higher bracket, so they would tender to move goods for a manufacturer and they would have new fleets doing this.

And the typical techniques used by these criminals, I hear blocking is a big one; they’ll sit behind the truck for half an hour and block the tracking system?

What they’re using is a jamming device and unfortunately these are quite easily available, you can buy it on the internet, or, as we’ve even found now through our investigations, that you can hire these. They work so well for hijacking syndicates, it completely blocks the signal generated by the telematics device in the truck so no one can see where the vehicle is, and no contact can be made with it, so it is a danger. There are one or two telematics companies that can counter that by using anti-jamming but it’s still in the development stage and the anti-jamming devices are quite reliant on the signal that they need to send the message back on. So the big problem at the moment is jamming devices, and we’re seeing that quite a lot now. 

It seems there’s almost a technological warfare between the criminals, tracking companies, insurance companies and the police to stay one step ahead?

Well yes, it is bad, it’s not the only thing that is being used, there is still a small element of collusion between drivers and between hijacking syndicates, when hijacking syndicates are able to infiltrate the driver base. You must also understand that hijacking syndicates are quite professional in the way that they operate. It’s something that is well planned so the jamming devices and other additional information that these guys have, for example, where vehicles are stopping and where they’re supposed to be offloading from the truck – so it’s quite an operation. Hijacking is quite an industry in this country.

Can you put a dollar and cents figure on how much that’s costing the economy?

Recently we did a presentation for Insurance Institute of South Africa (IISA), and we gathered statistics from quite a few sources and generally the feeling is that it’s costing SA probably about R3 billion per annum in goods that are being stolen, so that has a major impact on the economy. It has an impact on cost of insurance and it has an impact on cost of goods, so it’s quite a knock-on effect. 

R3 billion is a tremendous amount of money, what’s it going to take to bring that figure down?

What needs to happen is that logistics companies need to get more involved with risk management and insurance companies like ourselves. We’ve been developing over the last two to three years a tracking and monitoring bureau where we are able to track and monitor vehicles 24/7.  Now what we have in SA is a very high quality of tracking services which are available to logistics companies. There have been international surveys done, and SA comes out tops when it comes to tracking devices simply by the nature of what happens in SA and the crime rate. 

Tracking companies over the last ten years have really developed the product but logistics companies are not always monitoring these devices 24/7, sometimes the data that you can get from these tracking devices is not used correctly when it comes to risk management. So there is light at the end of the tunnel but it would take insurers and logistics companies forming stronger partnerships when it comes to risk management. So that’s what we see going forward, that’s where we are putting most of our development.

Do you come across much insider trading/corruption within the telematics sector?

No, not within the telematics sector, we haven’t really picked it up that telematics companies and companies that do shipments for telematics companies are involved in crime. What we’ve picked up through our investigations are just very well organised hijacking syndicates that are operating where we have found collusion between drivers and hijackers but that’s not the major cause of it.  The problem we have is hijackings because, as I say, it’s not opportunistic crime, these criminals go to great lengths to plan and execute hijackings.

How would we compare to international competition in terms of this loss, I hear that it’s also a big problem in the States, a lot of goods going off the back of a truck so to speak?

Hijacking of trucks has been around for quite some time, if you look back at data, look back into the 60’s and the 70’s in America it was quite prominent and it caught on here in SA towards the late 80’s and it’s grown to reach a peak period, and then it wanes off and then it comes back again. But because of the state of the economy and perhaps because we just don’t have the resources through normal crime prevention, through South African Police Services to cover all our bases  we have seen a spike in it.

It’s a relatively easy way for a well organised crime syndicate to make money. But that said – in the last two to three years we’ve seen an improvement when it comes to the prevention of hijacking and the recovery more particularly of the vehicle. So it’s the goods that are being targeted, they are easily moved and so easy to get rid of – you only see about a 50% recovery on goods but we see about a 90 to 93% recovery of the vehicles nowadays. We have definitely made inroads and we will see going forward when we apply telematics even to 25% of the information and if we apply the information better as we monitor them and we are actually monitoring tracking devices 24/7, we will be in a position where we can improve this vastly.   

Do you provide incentives to companies for good driving practices within their fleets?

We have a reward and recognition programme for companies to voluntary enter. If they want to enter the Highway Heroes programme, where we monitor truck driving behaviour through telematics and we’ve also got a driver of the year competition, it’s a little bigger than that and it covers more, it covers the driver’s behaviour on the whole. My advice to the logistics companies is to look after drivers well,  to make sure that drivers are informed all the time, to make sure that drivers have access to management, make sure that drivers have access to cell phones and that they are able to contact fleet owners when they need to. Another thing that we picked up is that drivers are not always 100% sure of what telematics device they have in the vehicle and how to use it correctly, so now that’s a major gap. A way to improve, and even to prevent accidents, not just hijackings, is to really get a lot closer to the driving force and that’s why we invest money into our Highway Heroes programme.

And we’ve seen the Easter death tolls halved over the last year, that’s obviously good for your business, fewer accidents on the road?

We measure the performance of a fleet and the performance of our business in loss ratio, our loss ratios speak for themselves, how many losses you’re having against a premium that you’re collecting, and we’ve seen an improvement of about 6% over the last 12 to 18 months. Suffice to say that the money that we are spending, if we just see that it’s adding value, adding value to the driver, and adding value to that we insure, so if we’re up skilling their workforce and you’re encouraging better driving  then you’re covering quite a few bases in one step. We have seen a result which is very, very pleasing.

Truck maintenance is another big talking point, how do you encourage your clients to keep everything up to date?

Unroadworthy vehicles are not covered in terms of an insurance policy so any insurance policy would have a clause to say that your vehicle needs to be in a roadworthy condition when it’s on the road. Going back to our first point, you asked me what’s the importance of insuring your fleet correctly – it’s very important. So if you have an unroadworthy rig on the road and it causes an accident and let’s say you lose that rig plus you cause two or three million rands worth of damage to third party property – that is not covered because your vehicle is unroadworthy, it can close your business.

So to do regular maintenance on vehicles is absolutely essential but not just from an insurance point of view but also from the running costs of the fleet. If you’re not maintaining vehicles properly you will probably find that they’re going to be using more fuel, they’re going to be using more oil, and they could possibly be going through tyres quicker because not everything is aligned. We really encourage vehicle maintenance because at the end of the day you’re putting quite a lot of lives at risk. We’ve seen some horrific accidents in this country and after investigation, quite often it’s found that the vehicle has been in an unroadworthy condition. So it’s of utmost importance.

Alcohol is a big killer on the roads, are we seeing any reduction in that?

From a trucking point of view, we really do not see a lot of that where truck drivers are tested after an accident and found to be under the influence of alcohol. I cannot comment on private cars and smaller cars, I specialise in the trucking. It certainly doesn’t seem to be a problem when it comes to truck drivers, we’re not finding in a lot of cases that drivers are under the influence when operating a heavy vehicle.

It would appear that the general level of driving in this country has improved over the last five to ten years?

Well we’re just talking from our own experience and what we have seen is a major increase in additional driver training and driver defensive driving because quite a few of the larger industries when asking a logistics company to tender on carrying their product would want certain standards. So for them the normal heavy commercial vehicle license wouldn’t be enough, they want something over and above that, for example,  a defensive driving permit and the vehicles need to be maintained. It is an auditing process – when logistics companies are tendering for Eskom, for instance, and for Sasol and for Engen – the bar has been lifted and this is coupled with the insurers and logistics companies forming partnerships to improve the wellness of drivers.

As the trucks are getting more advanced they are getting safer, easier to drive, that obviously brings the numbers down and also autonomous driving, how far away are we from that and how does that affect the insurance business?

I would agree with you 100% that the trucks are a lot easier to operate than the trucks of 15 years ago so that certainly makes it easier. But that said the skills still need to be there because there’s a lot of other road users that might not be as well skilled as a truck driver and no matter how skilled you are you’ve got to look out for what’s happening on the road. 

The rand devaluation, how’s that affecting the truck insurance industry?

The rand has always affected the industry because of the price of parts and the price of replacing vehicles so as it goes up and down. We’ll see an increase in the cost of repairs and we will see an increase in the costs of new vehicles, so according to how we’re doing and how we’re able to control loss ratios and minimise the accident and theft will determine where we would need to pitch our premium. But it is something that affects us directly because – so yes, it does affect us in the same way that it affects most commodities in SA as the rand goes up and down. Inevitably at the end of the day what the rand does is going to affect us in SA because we’re part of the economy.

And onto the greater African economy, where are the key growth areas and/or opportunities?

As an insurer we see a lot of the vehicles that we insure are venturing cross-border now and carrying goods up into Africa. The expansion of Africa as such and the development of Africa, the southern tip of Africa, have created quite a lot of logistics work to carry goods for companies that we insure. As a knock-on effect we’ve seen fleets grow and we’ve seen fleets being able to buy newer vehicles by way of contracts that they might be securing going up into Africa.  So there is certainly an effect on us as an insurer.

And I suppose the downside of Africa is the poor roads and more wear and tear on the vehicles?

Of the fleets that we insure most of our losses are incurred in SA so the accident ratios are higher in SA, obviously because of the congestion and the busier roads. As far as hijacking is concerned, theft, most of that still occurs in SA within our borders. We haven’t experienced major losses across borders and we haven’t seen an increase in accidents because of congested roads so far, so most of it is still happening locally.

That’s quite interesting, north of the border is perceived as somewhat more risky whereas you’re saying it’s less damaging to your bottom line?

Absolutely, if we look at the statistics and we look at where most of the hijacking is happening in Gauteng and KZN and if we look at the accident stats most of it is happening on the longer routes, like the N3/N1. This relates to the traffic on those roads, the theft and the hijacking. It’s easier when you have bigger targets and more of them, so that’s what we’ve found, most of the crime and accidents occur this side of the border.

And the N3 is the real wild west, how’s that managed to spiral so much out of the control whereas if you look at the N2 it seems a lot safer? 

I just think it once again boils down to the volume, if you look at the volumes of vehicles that are moving between Durban and Johannesburg, because of the port, the volumes there are huge.  One only has to take a drive down to Durban on a Friday afternoon and it almost looks like a highway now there are so many trucks on the road, but unfortunately it’s just volumes of commodities that are being moved and how we try and cater for this going forward. Do we build more roads or do we start trying to move more of these goods by rail?  Now I know there has been a push to try and get some of the goods off the road and onto rail, which means some of the more hazardous goods, like fuel and chemicals, but this is just something that SANRAL and all the other parties will investigate.

If you look at the shipping industry with the piracy they’ve got – armed guards on the ships and barbed wire and the whole toot, do you ever see that happening with trucks?

Not unless they carry cash, or really high valued goods then you get armed trucks. What we do in certain parts of the N3, vehicles are now starting to be escorted so there will be unmarked cars escorting vehicles to the high risk area, but that is an ongoing protection measure. I don’t think we will ever see the heavily armoured plated vehicle; I just don’t think that’s a very economical way or viable option to look at.  

Finally, these crime syndicates – how big are they and how far up do they go? 

We use private investigating teams to do most of our recoveries, and the feedback we’ve got from them, obviously limited feedback because there’s always an ongoing investigation, so we don’t want to put it out there, but what we have been told and what we have seen is that these are highly organised syndicates and to a degree, there are foreigners involved, so we do know that. It gets run almost like a business, a very well run business and they tend to try and keep one track ahead of us, they create a trend and they will steal the fuel for instance for two to three months and then as soon as they realise that anyone carrying fuel is now being escorted and its being protected then they will switch, so they’re organised from that point of view.

Gregory Simpson

Traffic on junction in city View of truck in an accident with car View of truck on an highway in an accident Warnblinkanlage Truck driver in semi truck cab with modern dashboard
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