Spiralling insurance premiums number one cause for concern

There are bleak times ahead for the road haulage industry if the findings of a recent survey conducted by the Irish Road Haulage Association reflect the mood within the sector. Here John Loughran reviews the survey.

There have been copious quantities of anecdotal evidence floating around the road haulage sector to suggest that escalating insurance costs are having an adverse impact on hauliers throughout the country. However, the full impact of the crisis remained unquantified until recently.

The Irish Road Haulage Association (IRHA) in a comprehensive survey of its members has found the single most significant issue within the industry is rocketing insurance premiums.
Issues such as the cost and scarcity of labour, increasing diesel costs and stagnant rates pale into insignificance. The over-riding problem is the cost of insurance. The survey confirmed the association’s worse fears in this regard. Spiralling insurance premiums are jeopardising the future of many haulage companies and putting the jobs of countless people at risk.

Alarmingly 98 per cent of those who responded to the survey said they had experienced insurance increases in 2002 . The survey found that motor insurance had risen by an average of 42 per cent, public liability insurance had soared by 59 per cent; employers’ liability insurance had increased by 63 per cent and finally goods in transit insurance had risen by 36 per cent.

It is generally accepted in the road transport industry that insurance costs accounts for between 10 and 15 per cent of turnover depending on the size of the operation. The IRHA has calculated that insurance premium increases will add between four and six per cent to running costs in 2002 alone. Given that most hauliers had to absorb similar increases in 2001, and will be faced with further increases in 2003, the situation is no longer tenable. The IRHA noted that more than half of the respondents (52 per cent) had no significant claims in the past five years, while 33 per cent felt that their claims history had improved. On this evidence it begs the question: Why are insurance premiums going through the roof?

The figures suggest - according to the IRHA - that hauliers are delving deep into their pockets to pay for minor bumps and scrapes, instead of putting their claims through their insurance company. The phrase buying a dog and barking yourself comes to mind. The survey also indicated that almost one quarter (22 per cent) of companies were under insured which will inevitably cause long-term problems for the industry.

Faced with crippling insurance premiums, hauliers are now looking at a number of options to reduce this overhead. Some 40 per cent of respondents stated that it was their intention to trade down their activities. In other words these companies are actively considering selling one or more of their vehicles. These companies indicated that they will be forced to lay off staff if they reduce their fleet size.

More than one in 10 haulage companies (11 per cent) predicted that similar insurance premium increases in the next trading year would force them to cease trading altogether. The IRHA has estimated that 500 jobs have already been lost to the industry as a direct result of spiralling insurance.
Blame for the current crisis is laid firmly at the door of the insurance industry. Some 70 per cent of those surveyed said that blame lies with the insurance companies. Another 44 per cent said the Government has responsibility for the problem, while 50 per cent blamed the legal profession and Ireland’s “compo culture.”

For its part the IRHA said it was disappointed at the lack of a customer/supplier type relationship between insurance companies and their customers and added “this cartel-type behaviour that exists at the moment cannot continue.”
The IRHA invited respondents to comment on the insurance crisis. The comments reflect the deep-seated anger and frustration that is brewing within the industry. Most comments alluded to imminent closures and job losses as a direct result of soaring insurance premiums.

One haulier commented: “This is an overwhelming burden on our company. The Government bailed out Aer Lingus in the wake of September 11. If we don’t get help there will be heavy losses.”
Another haulier said that “Government intervention is essential to tackle the current excessive insurance costs
we are now facing. We are looking at similar increases next year.”

The Government was also criticised for its failure to tackle the “something for nothing culture”, those making fraudulent claims and “greedy lawyers”.
The insurance industry in Ireland came in for its fair share of criticism, and many respondents claimed that insurers are operating in near cartel-like conditions with little or no competition.
Many of the respondents bemoaned the lack of competition and said that the Government needed to do more to encourage foreign companies to enter the market.

* The findings of the IRHA survey have been passed on to the Motor Insurance Advisory Board, who had sought submissions from commercial vehicle operators and to Dr. Jim McDaid, Junior Minister with responsibility for the road haulage industry.