Trucks are the lifeblood of South Africa, and truckers are the unsung heroes who spend hours behind the steering wheels of their vehicles delivering loads ranging from farm produce to hazardous chemicals across the country, 365-days a year. While doing so, they face several hazards which are not necessarily only confined to road conditions or adverse weather.
Truck owners and drivers have to grapple with a number of challenges ranging from road accidents to crime-related incidents like hijacking and theft of goods, to unforeseen roadside emergencies. All these events make insuring a single commercial vehicle or fleet something that has to be carefully considered.
The temptation for business owners who are operating in an industry where costs are high, competition is fierce, and margins are getting thinner, is to cut back on costs. More often than not, one of the first line items often to be targeted as a cost saving mechanism is insurance.
This could solve an immediate cash flow crisis but could be disastrous in the long-term against the following scenarios:
- The hijacking of a truck and its contents is still one of the most devastating risk facing South African truckers. With losses totalling close to R3 billion a year, this is a risk no business owner would want to carry. Being underinsured or not insured at all, could put a small operator out of business.
- A standard commercial insurance policy will not cover you when your driver doesn’t comply with the terms of the policy, even if it was without your knowledge. For example, driving under the influence of alcohol or driving with a fake licence. Taking Driver Dishonesty Cover will cover you against loss, damage, injury and liability that would otherwise have been excluded.
- Failing to fully insure trailers and goods in transit and make provision for towing or alternative transport of the goods in transit could be more costly than anticipated. The cost of a breakdown on a long-haul route could include damage to goods in transit and penalties related to perishables expiring before they can be delivered. These factors should, therefore, be insured against.
- Insuring a truck at retail value and not covering a potential financing shortfall in the case of a vehicle being written off, could result in a significant loss. It is also worth noting that the specific body type of the truck needs to be specified to ensure that the vehicle is covered for its full value. A truck that is insured for retail value based on the make and model provided to the insurer only relates to the chassis cab and the specific body type and other extras like cooling units or hydraulic lifts need to be specified.
- Losing a load that is not insured can be enough of a catastrophe — finding out that the company is then also liable for clean-up costs and repairing damages caused to infrastructure by a vehicle, could be a financial knock-out punch.
The most important thing to consider is that a standard insurance package may be appealing because of its cost, but not all transport operations are the same. When you are in the trucking business, it is important that you ask, ‘what if?’, apply various scenarios to your operation and then get expert advice to tailor solutions that suit your business.
Cutting back on insurance to increase profitability could provide short-term gains. At its worst, however, it could be a decision that places the company in an untenable financial position.