It’s been a tough 2019. It is almost as if business came to a halt due to the elections on Wednesday. And then there is the fuel increases, 3 in this year already.
Some transporters are looking at reducing their premiums, and some even consider going without insurance.
We all know the disastrous consequence only one truck claim could have on our businesses. Especially if your are faced with more than one third party vehicle.
However, your premiums are not totally beyond your control and with a little risk management you may even be able to reduce your premium.
Let’s look at only a couple of different ways to structure your fleet insurance.
- Conventional Fleet Insurance Cover
- Conventional + Deposit and Burner Option
- Aggregate Funding
This would be your most common type of motor fleet insurance. The insurer would rate your risk based on past claims, size of fleet, type of cargo, security devices installed in your vehicle etc.
Problem: There is no incentive for a fleet with a well oiled risk management system in place.
Conventional + Deposit and Burner Option
The way this option’s structure may vary from insurer to insurer but the basic principal is the same.
- A deposit percentage of premium is allocated to a profit share fund
- Should all losses paid or reserved exceed a pre-determined percentage, the premium payable to the Profit Share Fund is paid to the insured.
- Option only applicable where there is a maintainable and verified loss ratio.
Aggregate funding (with catastrophe premium)
This is a form of self-insurance, typically for the transporter who can handle certain losses themselves and is ideal for fleets with a well maintained risk management strategy in place.
This is also known as Risk Finance in some markets, and been in operation for more than 20 years. Over time, risk finance grew substantially as there was a common interest between the client and the insurer to minimise losses by providing incentives for risk management. The intention is to reduce the frictional cost contained in insurance premiums.
The facility provides a dedicated risk management “vehicle” by providing a wider scope in cover in categories of risk where insurance companies were either unwilling to provide cover or it was too expensive to obtain cover at appropriate attachment levels.
Summary of Benefits
- A reduced premium can be achieved by increasing deductibles
- The development of risk finance capacity
- Premiums paid are tax deductible in terms of Section 11(a) of the Income Tax Act
- Surplus premiums may be utilised for future periods / losses
- Investment income may be earned on funds in the form of a discretionary bonus
As no two companies / corporations have the same need for risk finance, we concentrate on understanding the profile of our clients, to enable us to develop a strategy which will meet their individual needs.
The main goal is to provide our clients with a solution which are affordable, flexible and sustainable.
Let us help you develop a strategy specifically tailored to your needs.