Vuyisani Titi, CEO of Lynx Transport Underwriting Managers, underwritten by GENRIC Insurance Company Limited, unpacks the risk and insurance challenges facing heavy commercial vehicle (HCV) operators in the current transport operating environment, both in terms of the vehicle assets and the goods in transit.

#1:  Impact of SASRIA increases on HCV owners and operators

The cost of insuring a HCV fleet faced a massive premium increase in SASRIA cover for loss or damage due to civil commotion, riots, strikes and terrorism. Following a horrifying spate of looting and rioting in KZN and Gauteng in July 2021, February 2022 brought increases of over 1700% as the special risk insurer looks to rebuild capacity after losses totalling R32 billion, spread over 14 000 claims.¹   The massive losses mean that policyholders will face very large increases on certain classes of business to ensure the sustainability of the insurer and its ability to pay claims on this crucial cover again in future.

HCV operators have been hardest hit with trucks exceeding 3500 kilograms attracting a massive 1736% increase. In material terms, that means that SASRIA cover for an HCV worth R2 million will increase from R375 per annum to R6900 per annum for 2022.¹  An HCV insured for R500 000 saw a premium hike from R94 to just over R1 720.Light commercial vehicles (less than 3 500kg) saw premiums increasing by 1455%.¹Extrapolate this across a fleet of vehicles and the financial implications for HCV operators are onerous – where SASRIA cover was previously a relatively insignificant driver of insurance costs for a fleet operator, it is now a major cost, likely to be passed on to the consumer.¹ However, when one considers the risks of the operating environment, and the continued risks for violent protests, riots, looting and even simmering xenophobic tensions, the risks posed to the insurer and the insured are very real and present.

While HCV operators may be tempted to forgo this crucial cover, it is strongly advised that fleet operators engage with their brokers to find ways to reduce their overall insurance costs with certain voluntary deductibles, co-insurance options and even self-insurance where it makes sense to do so, to keep their SASRIA cover in place.  While insuring assets and goods in transit against riots, strikes, civil commotion and terrorism is going to cost a lot more going forward, its critical importance in a balanced risk management programme in the current transport operating environment is not debatable.

#2: Truck and Cargo hijackings are on the rise 

With alarming unemployment levels and a decline in visible and capable policing, trucks and cargos on the roads are increasingly in the sights of criminal syndicates operating sophisticated hijacking operations.  Crime statistics released by Police Minister Bheki Cele for the first quarter of 2021 showed that four courier vehicles were hijacked every day in South Africa, and that truck hijackings increased by 24.6% compared with the same period in 2020.¹ 354 trucks and courier vans were targeted during this period for their high value cargo which was typically food, appliances, mobile phones and other prized goods that are easily and quickly offloaded, transported away and sold for cash into the illicit market.²

In addition to cover for the vehicle asset, HCV operators need to ensure that they have adequate“Goods In Transit” (GIT) cover in place from the start of when goods are loaded at the depot until the time it is offloaded at the destination and responsibility/possession is transferred to the receiving party.  GIT would provide cover for:

• accidental damage of goods if a truck should be involved in an accident,
• load shifting where the load moves during transit causing damage to the goods,
• theft of goods where goods are stolen at approved and sanctioned truck stops and,
• loss of cargo due to fire.

#3: Fleet operators employing unqualified and unverified drivers

A growing trend is the lack of rigorous verification of driver qualifications, licences and work permits where applicable on the part of the employer.  This is often only picked up at claims stage where the insurer would find that the driver does not in fact have a valid licence to operate the vehicle – leaving the truck owner in a serious financial predicament as any claim is likely to be declined if the vehicle was driven illegally. 

It is crucial that HCV operators invest the time and resources to conduct thorough verification and background checks on every employee, especially considering that they are putting the driver behind the wheel of a multimillion Rand asset, not to mention the potential for hefty third-party liability in the event of an accident where there are injuries or worse. The costs saved by not doing proper verification pales in insignificance when you consider the liability of putting an unlicensed and unqualified driver, or one with falsified work permits, behind the wheel of your HCV and valuable cargo. 

#4: Dealing with driver fatigue and loading negligence

According to Lynx, around 40% of its accident claims are attributed to driver fatigue and negligence. With transport operators trying to make up for lost time and revenue as a result of the pandemic lockdowns and supply chain bottlenecks, many HCV long-haul drivers are subjected to challenging conditions and pressure to meet deadlines despite weather, road and safety conditions.

From a loading perspective, overloading, and even incorrect loading, is a dangerous risk.  It inevitably means that the HCV will not operate as it should, it won’t stop or brake as expected and steering and controlling the vehicle on the road will be precarious at best. It is crucial that drivers and transport operators know how to load and offload cargo correctly, as well as the correct storage and handling conditions of such goods.  It is also vital to understand when and how your ‘goods in transit’ coverage applies once cargo is offloaded and ownership or possession is transferred to another party.  

Driver fatigue is another crucial issue.  Legally a driver is only allowed to drive for a set number of hours before having to stop and rest.  Best practice demands that there should be two drivers to every vehicle for long hauls, so that drivers are able to relieve each other at the appropriate intervals.  Unfortunately, some operators cut corners on the additional costs, and push drivers to do longer hauls without rests at scheduled intervals, putting not only the driver, vehicle and load at risk, but other innocent road users too.

The risks of skimping on risk management, mitigation and insurance

“The importance of having a comprehensive risk mitigation programme in place cannot be emphasised enough. All industries are dealing with the impact of economic slowdown and slow recovery in the midst of the pandemic, coupled with trade tensions and political upheaval which are exacerbating the traditional risks.  In such an environment, the HCV and transport sectors are under tremendous pressure in terms of costs and achieving operational efficiencies, while also having to balance the risks faced in safeguarding people, high value vehicles and high-risk cargos through insurance solutions.  

“It’s crucial to fully interrogate the value and nature of risk faced by your HCV operation, and in turn ensure that you are adequately covered for your assets, people risk and cargo. The temptation to cut costs and skimp on insurance must be avoided at all costs, and operators need to apply proper risk management and assessment protocols to reduce their exposures in uncertain and challenging economic conditions.  It is here where the skills and sector knowledge of an experienced HCV insurance underwriter and professional broker proves invaluable, ensuring that even in a worst-case scenario, your business can operate as normal, safeguarding your bottom line and reputation,” concludes Vuyi.

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Lynx Transport Underwriting Managers is an Authorised Financial Services Provider (FSP: 2880). Underwritten by GENRIC Insurance Company Limited, an Authorised Financial Services Provider (FSP No: 43638) and licensed non-life Insurer.

References:

1. FA News, Riot Cover to soar 1736%. Gareth Stokes.  Available at: https://www.fanews.co.za/article/talked-about-features/25/featured-story/1147/riot-insurance-cover-to-soar-by-up-to-1736/33666[Accessed 25 March 2022]
2. SAPS Crime statistics 2020/2021, released by Minister of Police on 14 May 2021, available at https://www.saps.gov.za/newsroom/msspeechdetail.php?nid=32565  [Accessed 25 March 2022]