How insurance can help keep your business afloat when tough patches are hit*
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Roz Shaw
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Road transport dominates Australia’s freight sector and demand is projected to double by 2030, but profit margins are tight and some companies are recording drops in revenue while others have entered insolvency.
With average profitability for the industry estimated at around 6 per cent, staying in the black is a balancing act.
According to Australian Securities and Investments Commission 2017–18 stats, 379 companies in the transport, warehousing and postal industries entered insolvency, mainly due to inadequate cash flow.
Even large companies like Redstar and Toll have been affected.
“The transport industry is under intense pressure from retailers and manufacturers at the top of the supply chain, which involves squeezing margins through low-cost contracts,” Transport Workers Union (TWU) national secretary Michael Kaine explains.
The fierce competition for business makes it difficult for operators to pass on labour and running costs or invest in updating their fleets.
Compounding the problem, the increased tare mass of new trucks reduces payload, making managing profitability even more of a challenge.
While external factors like fuel price are impossible to control, operators can ensure they survive unexpected events, whether these involve accidents, damage or legal liability, by having the appropriate insurance protection in place. An insurance payout can mitigate losses that might otherwise be ruinous and enable your business to ride out setbacks.
Everyone is aware of their motor policy but vehicle accidents aren’t the only area where a claim might ruin your business.
Read Roz Shaw’s views on tackling risks and keeping our drivers on the job, herr
A general property policy can ensure that your buildings, contents and stock are covered in case of any damage or from a worst case scenario such as complete destruction by fire – and don’t think, “It won’t happen to me” – it’s a real risk that needs to be considered.
If you are a contractor, especially if you rely heavily on a single customer, you can protect your business from non-payment by companies in financial difficulty or that have gone into insolvency. Trade credit cover guarantees your revenue stream, ensuring you have working capital to keep your trucks on the road.
Other risks are less straightforward. Legal issues can be extremely costly so product and public liability insurance is essential to protect you and your business against a range of legal liabilities, including personal injury and property damage.
Similarly, management liability cover protects both your business and individuals in executive roles against costs arising from legal claims against your company for negligence or wrongdoing. Even if you have done nothing wrong, you will have to pay to defend your case.
There is also a relatively new cover that is becoming more and more important to your business.
These days every business needs to be conscious of the exposures that using digital systems can bring. Everyone in business uses a computer or device and the likelihood of a cyber attack is increasing all the time.
Security of your own and your customers’ information could be compromised either accidentally by your own staff or deliberately by a malicious outsider.
To streamline paperwork and keep track of your insurance, the ability to bundle your freight transport and logistics insurance cover into a customisable package with optional extra policies is ideal.
That way you only have to worry about all your renewals once a year and you can find all your policies in one place
The start of a new year is a good time to consider the role insurance can play in ensuring the coming 12 months are profitable for your business.
Roz Shaw is Head of Transport at international insurance broker Gallagher, and the former CEO of Hawkins Road Transport
*Note: this column was written before coronavirus Covid-19 became a national crisis
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