Transport and logistics businesses across the UK are operating in an increasingly challenging economic environment. Some businesses are struggling to stay profitable and are looking for ways to optimise cost. This exercise should include the insurance programme.
Some of the main drivers for the mounting pressure on transport and logistics businesses are rising fuel, energy, repair, leasing, and fleet maintenance costs. In addition, there are labour shortages, de-carbonisation efforts, strong competition, and high interest rates – all of which contribute to a challenging time throughout the industry.
A difficult year for transport and logistics businesses
According to Barclays’ 2023 Logistics Confidence Index (opens a new window), UK logistics leaders’ confidence rating was 47.3, down from 50.4 in 2022. This marks the second lowest figure ever – any figure below 50 indicates overall pessimism in the sector. What’s more, 75% of operators felt that business conditions were more difficult now, up 15% on 2022.
This dip in confidence reflects a challenging period for an industry marred by insolvencies. Norfolk-based haulage firm Lochace Ltd, otherwise known as Bomfords Group, went into administration towards the end of 2023 (opens a new window) after more than 40 years of providing warehousing and goods transportation services. The company blamed a shortage of HGV drivers, as 10%-20% of the fleet were inactive, necessitating expensive agency staff and continuing maintenance costs.
Similarly, Ipswich-based haulier Magnus Group entered administration (opens a new window) on 23 November 2023 following almost a year of difficulties including quickly rising electricity charges and business rates, as well as delays in pending new business.
Overall, 463 haulage businesses filed for insolvency (opens a new window) in the UK over a 12-month period (ending 30 September 2023), a rise of 173% in just two years, according to accountancy firm Price Bailey. Price Bailey also analysed (opens a new window) credit risk scores and found that 41% of London-based haulage businesses are classified as being at maximum risk, up from 26% just a year ago.
Given the current economic climate and the industry’s struggles, businesses in the sector are looking for ways to reduce their cost base.
Reducing insurance spend
There are a number of strategies Lockton can implement to minimise cost and support business through challenging economic conditions. Here are a few options:
Application of Minimum & Deposit Premiums – a discounted percentage premium is paid at the beginning of the year, normally 85-90%. The balance of the premium only becomes payable upon breaching claims targets or lapsing the policy. This can result in 10-15% day 1 premium savings to free up cash flow.
Facilitate access to low-interest insurer monthly instalment facilities, which can provide up to 10% saving against traditional finance options.
Low Claims Rebates & Profit Shares can provide a premium rebate at the end of the policy year, should an agreed claims target be met.
Introduction of Fixed Rating Agreements – typically applicable over a 2–3-year period, a Fixed Rating Agreement can be negotiated with an insurer to offer premium stability.
Effective Declaration Premium – the rate charged on planned vehicle additions/deletions is structured to create the most effective declaration basis, i.e. quarterly, half yearly, or annually.
Optimum Excess Analysis – analysis of previous years’ claims data to identify the cost effectiveness of a higher excess.
Efficient & Effective Claims Service – our claims proposition aims to reduce repair times and the leasing costs involved whilst awaiting vehicle repair. In respect of spurious third-party allegations, liability will be defended where possible. When liable, third-party claims cost will be minimised.
For more information, please contact:
Scott McLuskey, Transport & Logistics Practice Lead
M: +44 793 173 2639
