Transporter’s insurances can make or break a business. Be aware that buying based on cheaper premiums and lower excesses can be catastrophic
Insurance on a heavy commercial vehicle remains one of a transport contractor’s major costs. The total cost of insurance risk, depending on the losses incurred, range from 3% (no claims in a 12 month period) to 13% (one windscreen claim) of the vehicle value per annum . It is no wonder then that many transporters are looking at excess buy downs or excess waivers to reduce the additional cost exposure in the event of a large claim. Some Haulier excesses include a basic excess of 10% of the value of the vehicle with a minimum R100 000, for example. Whilst this does reduce the exposure in the event of a claim, it does add to the total cost of insurance, increasing the 3% per annum to around 5% to 6% per annum (with no claims). However, the premium is only one component of measuring the total cost of insurance risk. Additional losses which are uninsured like the excess towing costs not covered by the policy, also come into play. It is therefore imperative to ensure that a business is adequately insured. When comparing different insurance, it is advisable to employ the services of a professional broker who is able to discern between the key differences in the various offerings presented to the transporter. The analyses of the differences in covers is fundamental in making the right decision. Examples of some significant differences include, but are not limited to:
- Basis of Indemnity – market or retail value and whether the condition of average is applicable.
- Warranties and Conditions – the nature of these can have a significant impact on the scope of cover. For example a simple condition that the vehicle be maintained in a roadworthy condition in accordance with the relevant legislation, can mean that a claim can be repudiated on something like a cracked windscreen or damaged or missing side mirror. Some of the better quality products specify specific safety critical items as being the key aspect of roadworthiness. Other examples include loading a vehicle above the limits for which it has been designed to carry loads safely or the allowance for towing a vehicle involved in an accident being limited to R15 000 to R25 000 – such low limits can mean a significant uninsured cost in the event of a claim.
- Operators of larger fleets (more than 5 vehicles) should also be aware of accumulation limitations when the vehicles are parked on the same premises when not in use. Where the insurers impose a total accumulation limit of R4m in one location for example, 5 vehicles (horse and trailers) could easily exceed R7,5m which would leave the transporter with a R3,5m exposure.
