Are Heavy Commercial Vehicle insurance rates unsustainable?

The transport sector is a critical contributor to the economic health of our country. Aside from our logistical reliance on this industry, the opportunity to stimulate and develop employment through owner driver initiatives cannot be underestimated. And i

Currently the transporter is facing a barrage of challenges, the foremost amongst which is the containment of its operational costs. Rapidly increasing petrol prices, the still looming threat of the e-toll systems, rising costs in vehicle maintenance, driver training and insurance premiums are all expense items laying siege to the sustainability of the transport industry.

A collaborative and structured approach involving both the private sector and the appropriate state bodies is required to review and respond to the multitude of challenges facing this crucial sector. The onus should not fall on the insurance industry to bear the bulk of pressures on cost containment.

As would occur in any capitalistic environment, new underwriters see challenge as opportunity and enter the fray. This has given rise to a competitive frenzy within our heavy commercial vehicle insurance sector and a war on rates has been waged. Repeated examples support speculation that, in many cases, carefully considered strategies have given way to market penetration at all costs. This is often achieved by the offer of premiums that are simply uneconomical to sustain.

Unfortunately, this development questions whether we are evolving positively as solution providers to an essential transport industry. Or are we stepping in with opportunistic offerings with little foresight for long-term resolution.

It is my view, that what is required is not the cheapest rates but an intensified focus on risk management. This will ensure long term disciplines are followed which yield sustained benefit to all stakeholders. Short cuts on maintenance should not be tolerated.

However, if we constantly submit to the demands of our clients rather than assume control, our industry will be subjected to undue strain. This may result in financial distress in certain cases and may further impact on the generosity of insurers to do the right thing on claims. These insurable losses will, in many cases, be scrutinized with the intent to invoke terms and conditions so as to escape or restrict liability. Consequently contravening the spirit of fairness, borne from fear of losing margins and investors.

Let us not perpetuate behaviour that supports cheap insurance as the best option, but revert to technical underwriting that ensures sustainability. Let us not be influenced in our judgment by the quick and easy buck, but revert to the implementation of professional and practical evaluations and pricing.

This call is not intended to defeat competition, but is proposed to responsibly protect our industry and ultimately our clients. Disciplines are required to ensure that enough capacity remains to effectively provide our promise of long term security, firstly for ourselves and consequently to one of the many business sectors on which so much of our desired economic future lies.