Part two of a conversation with Abrie Olivier, Managing Director, VAPs Insurance and Tyler Botha, Head of Claims, HCV, Renasa Insurance, about the very interesting topic of HCV insurance.
Tony: The role of the broker, is fast shifting to that of a risk manager. Based on the experience over the last year in the trucking environment, there’s been quite a bit of a development on the SASRIA side, on what you guys call the M8 category of motor cover. Can you tell us about your view on that, because it has a huge impact?
Abrie: Unfortunately, this 1 700% increase comes at a very difficult time for transporters in South Africa. As an example, one of our larger client’s SASRIA premium is going up from around R8000 a month to R90,000 a month. Transporters are under tremendous pressure. The diesel price went up over the past 18 months by 43%. If the N3 closes for one day, it costs these guys millions. So, it is a bit of a perfect storm and most of them are still recovering from the COVID related losses.
Tyler can also tell you about inflation on part prices. These global distribution issues with parts, where they just cannot get their hands on parts, and they can’t renew their fleets because there’s no stock. So, with regards to SASRIA, it really came at a very unfortunate and imperfect time for truckers. However, SASRIA has come out with an option now where a client can take out an excess, SASRIA had no excess attached to their cover before, but they have said that a client can now opt for an additional excess per vehicle. I think it’s up to R200,000, for which they will receive a discount. The client can opt to go for co-insurance of up to 50% with the resulting 50% discount on the premium.
Tony: With the complications in this environment, the very high risk, and then the huge sums involved when you have a risk event or a claims event, both from your side Tyler and on the other side, it’s so important to be working with the intermediaries to be able to limit these risks.
Tyler: The industry is at a point where the incorrect rate is being applied on a truck in terms of premium, but the correct rate is impossible to achieve, because the transporters, and the rates they are getting, will make insurance unaffordable. So, you are stuck between a rock and a hard place. What do you do? Do you increase the rate to what the desired correct rates should be, looking at the environment, the value of the truck and what the average repair costs is, and end up losing the client and not being able to sell a product? Or do you reduce the rate to what is affordable for the transporters, and then start applying procurement and out of the box thinking to try and bring down the claims costs, without prejudicing and without reducing the quality of repairs and service?
We have opted for the latter, trying to be actively involved with every single claim with the underwriters and broker. I come from one or two other large insurance companies, where unfortunately, what we have noticed, is that there is a bit of a gap between the underwriters and the actual claim. So, you always split an insurance company, with the underwriters doing the policy underwriting with the intermediaries and then your claims stop. Now, because we are in one office, we have the claims staff and the underwriter working hand in hand.
Abrie and I sit on a weekly basis, we will chat about what is going on in the market, what types of trucks are higher risk, what types of trailers are higher risk, what’s the average cost on different types of vehicles, so you can start applying that to your ratings when you’re doing a policy.
If I see something in the claims industry that’s a concern, where there’s a higher damage related cost, for example, the front bumpers and headlights on a specific truck is more expensive then, if a client wants to underwrite this specific vehicle as a fleet vehicle, we know that the rate needs to possibly be a bit higher or have an excess structure. We can then explain to our client why we added that rate. It is plain and simple; the repair costs have probably gone up in the last four to five years by 350-400% and that is being conservative. But the rates haven’t gone up enough to cover these repair costs.
Panel shop cost had to go up because labour goes up. As soon as the electricity goes up, the labour needs to go up. When diesel goes up, your parts go up because of your delivery services. With import costs going up so much during COVID, our part supplies are constantly going up by 15-20% while on the back end, insurers are not getting the premium.
Our strategy is to be experts in the claim division, where we scrutinise every claim to make sure we’re not spending more than we should. If there’s a way to reduce the costs by being more streamlined, we do it. We’ve got all the major panel beaters that work with us to try and help us source the correct parts at the correct prices. We also have agreements to work with large OEMs, partnering with them to assist us and our clients by giving us a better price on these parts, or we end up writing off trucks.
But all of this take a lot of initiative because unfortunately, assessors and claims handlers don’t always have the mandate to make these calls. So that’s why I’m constantly involved. Where I see there is potential for savings or potential where we can work with the client or the OEM to have a positive result for the client, as well as the insurer, then we do that.
Abrie: Tyler is heavily involved; he talks to about 50 brokers a day. Like most insurers these days, we do a lot of product specific and underwriting training with Tyler and his team will do work for us on the client side.