 Fleet chiefs must cut costs or face the consequences: insurance premium switch to third party provides instant ‘big win’
Fleet managers must implement a range of recession-busting, cost-saving measures, but consultants say there is frequently only an appetite to retain the status quo.
Recession demands a radical approach to managing vehicles to cut costs and Fleet Support Group has launched a web-based interactive forum to enable customers to exchange money-saving ideas.
The forum, which can be accessed at www.fsguk.com, is one of the initiatives to come out of FSG’s Fleet Cost Reduction Steering Group, which has also published An Action Plan to Cut Fleet Costs.
However, Gary Kent, who runs Toot Rock Consulting and has around 30 years fleet experience, latterly as European Fleet Manager at City business solutions organisation Dun & Bradstreet, says too few fleet managers are focussing on cost-cutting.
He said: “It is clear that there is a lot of cost available to be taken out of transport operations if there is an appetite to do so.”
Mr Kent pinpoints crash and insurance costs as the areas for the biggest immediate financial wins.
The aggressive targeting of drivers who are involved in road crashes, targeted driver training for employees deemed ‘high’ risk and, crucially, a switch to third-party insurance are the three key cost-reduction action areas, he says.
Following involvement in a road accident, drivers should be interviewed and measures taken in a bid to avoid a repeat incident. In addition, regular ‘offenders’ should face disciplinary action, advocates Mr Kent.
However, it is a switch away from fully-comprehensive insurance to third-party cover, even without fire and theft, that he believes the most significant financial savings can be made.
Huge premium savings are available, along with savings in the typical 5% Insurance Premium Tax. He has also identified cash flow benefits by switching to third-party cover as vehicle repair bills will be paid on a ‘when due’ basis over the course of a year, while fully-comprehensive insurance cover demands that expensive premiums are paid up front.
In addition, Mr Kent believes that ‘fire and theft’ cover is an unnecessary requirement for many fleets and asks them to analyse their records to see the last time a company vehicle was stolen or caught fire.
“Many fleet managers I have spoken to say it is business as usual. In the current economic climate that should not be the case,” he said. “Some fleet managers also say that insurance is not their responsibility and it is an issue dealt with centrally. While that may be the case, it should not stop them from influencing policy changes and recommending a new approach.”
Mr Kent concluded: “Fleet managers who are not proactive in taking cost-cutting action may be deemed surplus to requirements and find themselves joining the ever-lengthening queues of the unemployed. However, forward-thinking, financially astute fleet managers may be their employer’s saviour.”
 FSG starts roll out of all-new RiskMaster II
RiskMaster II, the latest version of Fleet Support Group’s award-winning occupational road risk management web-based programme, is soon to be rolled out.
All RiskMaster customers will eventually be enrolled with the new programme, which will be gradually phased in over the coming months.
FSG has a long history of encouraging companies to focus on road safety both to ensure legislative demands are being met and costs are effectively managed.
RiskMaster II takes automation to an entirely new level and ensures that no reporting requirements can be bypassed or fall foul of human error.
FSG Chairman Geoffrey Bray said: “We have listened to our customers and taken significant steps to remove human involvement. Data requirements are such that the next stage can only be started once the previous element has been fully completed.
“This means that driver non-compliance with pre-set company parameters is flagged up automatically. Strict disciplines are built into RiskMaster II and compliance will show that businesses are focused on safety.”
Under the system, employees who drive a company car, drive their own car on business or are occasional drivers are granted a Permit to Drive following a DVLA licence check. An online driving ‘test’ is then used to profile drivers as ‘low’, ‘medium’ or ‘high’ risk, with the assessment used as the basis for any driver training, including on-the-road. Vehicle maintenance records, insurance details, MoT and VED records, and any data on crashes and motoring offences are also fed into the system.
As information is supplied, it is analysed by the RiskMaster system that point scores a driver’s data. If points rise above a preset level, management is alerted. So a driver can qualify for a full permit, or a temporary permit, or be denied.
The system creates a comprehensive, individual Driver Operating Life Report from which data is used to continually assess individual drivers in their driving-at-work activity.
Mr Bray added: “Evidence from our RiskMaster users suggests that RiskMaster provides: major safety benefits; financial savings; a demonstration of social responsibility towards other road users; and a legally-recognised audit trail.”
 WHSmith puts drivers’ safety first with Permit to Drive programme
WHSmith, one of the UK’s leading retail groups, has issued Permits to Drive to its 1,100 at-work drivers across the company to ensure maximum occupational road risk management compliance.
The company, a long-time customer of Fleet Support Group has introduced the organisation’s web-enabled RiskMaster programme.
The phased introduction of the programme, which measures individual driver compliance with WHSmith’s best practice occupational road risk policies, has now been completed across staff who drive on business and are employed in the company’s London and Swindon headquarters, in High Street stores and across the organisation’s Travel business.
Recognising that best practice in the area of managing road safety has been continuing to develop, with further impending changes of legislation resulting from the Corporate Manslaughter and Corporate Homicide Act, WHSmith completed an internal audit of its existing business policies and control procedures.
Although a variety of road-safety risk management measures were already in place, including checks on driving licences and maintenance records for company vehicles, WHSmith wanted to strengthen its controls in this area further.
The company then conducted a fleet marketplace review of available occupational road risk management procedures. WHSmith concluded that FSG, its existing provider of a range of fleet management services, offered the most comprehensive solution.
Analysis of individual driver information fed into the RiskMaster system builds up into a Driver Operating Life Report. Each driver is simultaneously measured against WHSmith’s own specific parameters, that have been pre-fed into the system.
WHSmith drivers are granted a Permit to Drive by their employer through the FSG programme and must reapply for approval annually.
To overcome the risk of non-compliance by drivers with WHSmith’s programme and policies, the company will only pay monthly mileage expenses to those with a current Permit to Drive.
This programme has helped WHSmith focus on monitoring any potentially higher-risk drivers, which includes those who drive more than 25,000 miles a year on business, together with those employees with a significant number of penalty points on their licences and those who have any history of involvement in accidents. This focus has led to one employee leaving the business, who had a history of accidents, licence endorsements and a further impending driving ban.
Mark Sabin, the Group’s Risk and Audit Director, said: “Commercial risk management is important for WHSmith. We have tightened up procedures for managing road safety in order to manage the risks in this area more effectively. Due to the phased introduction of the programme, it is too early to quantify the potential savings at this juncture accurately, but we are confident that we will see future ongoing reductions in our insurance-related costs and vehicle maintenance charges.”
 New law foils health and safety cuts due to recession
Companies must not take shortcuts on their health and safety policies and procedures in order to reduce costs in the economic downturn.
That’s the warning from a number of business and legal experts following the January introduction of the Health and Safety Offences Act 2008.
The new law toughens the sentencing provisions contained in the Health and Safety at Work Act 1974. The legislation is aimed at punishing individuals just as the 2007 Corporate Manslaughter and Corporate Homicide Act, which was implemented in April last year, targets organisations where breaches of health and safety laws result in death..
Health and Safety Executive Chair Judith Hackitt said: “This Act gives lower courts the power to impose higher fines for some health and safety offences. It is right that there should be a real deterrent to those businesses and individuals that do not take their health and safety responsibilities seriously. Everyone has the right to work in an environment where risks to their health and safety are properly managed, and employers have a duty in law to deliver this.
“Our message to the many employers who do manage health and safety well is that they have nothing to fear from this change in law. There are no new duties on employers or businesses. We will continue to target those who knowingly cut corners, put lives at risk and who gain commercial advantage over competitors by failing to comply with the law.”
Health and safety specialist lawyer Michael Appleby, of Housemans in London, who is an adviser to Fleet Support Group, says the law could be used to prosecute an employee whose management failings resulted in a car or van crash that was caused by, for example:
- Illegal/unsafe tyres
- A poorly maintained vehicle
- An employee being forced to work long hours
The maximum penalties under the Act, which apply to a wider range of health and safety offences than previously for fleet managers and fleet decision-makers, including directors, are: a fine of up to £20,000 (a rise from £5,000), and for the first time two years in prison or both.
The Forum of Private Business says companies must have in place stringent health and safety procedures.
The FPB’s health and safety adviser Martin Mulholland believes health and safety breaches are now being treated as seriously as other criminal offences and, he called on businesses “not to take shortcuts on their health and safety policies and procedures in order to reduce costs in the economic downturn”.
It is a view shared by the British Safety Council, which agrees the legislation should be a deterrent to businesses, especially those considering cutting back on training due to the economic downturn.
Chief Executive Brian Nimick said: “With the new risk of higher fines and possible imprisonment for health and safety offences, this law should act as a deterrent and increase awareness of the need to adequately train and protect workers. Risks including accidents, illness and even deaths among the workforce could cost far more in the long term than the short term savings gained from cutting back on training.”
Driver licence checking, online risk assessments, driver training, Permits to Drive and telematics are all part of the arsenal of safe-driving interventions being used by many businesses to improve the safety of their employees who drive company or their own vehicles on work-related journeys.
Mr Appleby said: “Those investigating a road crash will aim to identify who is responsible for managing occupational road risk. Where no evidence of an organisation planning, delivering, monitoring and reviewing road safety can be found charges could result.
“Businesses must be able to demonstrate how they manage road risk and that someone is responsible for managing that risk. But bosses cannot simply delegate the management of that risk and expect no comeback if things go wrong. Fleet managers must be given the support, the tools and the authority to be able to manage the risk effectively.”
 PCP financial turmoil could spell rising demand for company cars
The recession could give a new lease of life to company cars as part of employees’ remuneration and benefit packages, according to Fleet Support Group Chairman Geoffrey Bray.
The last decade has seen a surge in businesses providing cash alternatives to company cars for employees. As a result, the number of company cars on Britain’s roads has dropped to about 1.1 million - 500,000 fewer than when the emissions-based benefit-in-kind tax was introduced in 2002 - according to HM Revenue and Customs’ figures.
Many employees taking a cash option have used the money to fund a car through a personal leasing scheme. However, as a study by motoring magazine Auto Express has revealed, nose-diving residual values are leaving many drivers facing negative equity on their vehicles.
Mr Bray said: “Companies are being irresponsible when expecting staff to take up cash alternatives in the current climate.”
But FSG is continuing to receive inquiries from businesses on the merits of cash alternatives to the company car.
However, Mr Bray, who is witnessing his fourth recession as an industry boss, said: “Cash-for-car is nothing but financial engineering from the corporate viewpoint. Businesses that value their staff should not be encouraging the take-up of cash alternatives in the current economic climate.
“Employees who are coming to the end of a PCP-style contract are going to be in for a massive shock when they return their car and discover its value is massively below the sum they anticipated.
“As a result they will more than likely hand the car back and walk away and look to return to their employer’s company car scheme. Meanwhile, employers that have shelved their traditional company car schemes in favour of cash alternatives may want to reintroduce them. Employees, typically a company’s most valuable asset, will in the main be loath to risk the prospect of negative equity in the future.”
Auto Express calculated that the negative equity shortfall for drivers across the UK could collectively total £272 million.
While not all motorists affected will be ex-company-car drivers, many are likely to be. Personal contract purchase schemes typically involve drivers making a series of monthly payments for their car over a pre-determined contract period, usually two or three years. Then a final ‘balloon’ payment is made to secure ownership of the car at the end of the contract period. This payment is based on the predicted end-of-contract value of the car at the time the agreement was taken out.
But the ongoing slump in used car prices caused by the economic turmoil means that many of the residual value predictions are thousands of pounds above the actual value of the car. As a result, to secure ownership of the vehicle drivers will have to pay significantly more than the car is worth. The alternative is to hand the vehicle back at the end of the contract period and walk away leaving a vehicle to be sourced elsewhere.
Mr Bray added: “It’s a case of once bitten, twice shy. Plummeting residual values caused by the wider economic situation mean there is no incentive for employees to fund a car through a personal leasing type arrangement. As a result, the recession could ironically halt the slide in the popularity of the company car, as highlighted by HMRC figures.”
|
