Road safety: Time to come off the back burner

However, it doesn’t have to be that way, according to Yvan Berthou, Global Head of Motor, Zurich Insurance Company and Andrew Bradley, former risk manager at Nestlé.

Road safety is a topic of huge economic and social importance. According to the World Health Organization, around 1.3 million people are killed every year and some 20 to 50 million are injured as a result of road traffic accidents. By comparison, around 31,000 people died in natural disasters last year.

These statistics are disturbing, and sadly the trend is currently heading in the wrong direction. Post pandemic, accident frequency and severity have increased, led by changes in driver behaviour, increased economic activity and the growing cost of vehicle repair. And despite being a major cause of workplace-related deaths, road safety does not currently get the attention it truly deserves.

Risk managers and sustainability managers have a common objective, according to Seach. “Both have the aim of protecting people, property or assets, and the environment; so the process that a risk manager relies on to identify, assess and mitigate risks is similar to the process that will be used to understand ESG related issues.” She points out that, as with risk management, sustainability is about doing the right thing while adhering to corporate ethics and protecting the organisation’s reputation.

This situation is not sustainable and a concerted effort from all stakeholders is required if we are to reverse this trend and mitigate the human and economic impact of rising mobility.

Mixed blessing

While there is a lot to celebrate about economic prosperity, it is often intertwined with increased mobility, which can have devastating consequences in terms of human lives and the environment. Today, there are around 1.5 billion vehicles on the road globally, with the majority in Asia, Europe and North America.

In low- and middle-income countries, more vehicles on the road typically translates to an increase in the number of road accidents. Around 93% of the world's road traffic fatalities occur in low- and middle-income countries despite these countries only having 60% of the world's vehicles, according to the WHO. Even in more mature markets, the number of accidents often increases with rising employment levels and mileage.

However, this pattern is not inevitable. Until recently, many of the affluent countries have experienced a decades-long decrease in the rate of road traffic accidents, due to a combination of factors, including safety regulations (speed limits, seat belts, etc.), infrastructure, law enforcement and technological improvements, such as airbags and collision avoidance technology.

Wrong turn

Unfortunately, the longer-term trend of declining road deaths in high-income countries appears to have been derailed as economic and behavioural changes are driving the number and cost of road accidents ever higher.

According to the National Highway Traffic Safety Administration (NHTSA), the number of people killed in road traffic accidents in the US last year was almost 43,000, a similar number to the previous year, which was the highest in 16 years. Fatalities increased 18% in the US between 2019 and 2021. In Europe, around 20,600 people were killed in road crashes last year, a 3% increase on 2021.

This is despite ambitious EU and UN targets to reduce the number of road deaths. The UN Decade of Action for Road Safety 2021-2030 aims to prevent at least 50% of road traffic deaths and injuries by 2030 by promoting safe roads, vehicles and behaviours.

Post-pandemic, more cars on the road means more accidents. But we also see adverse behavioural changes, such as speeding and distracted driving contributing to significant increases in the frequency and severity of accidents. There was a 12% increase in fatal crashes in the US involving a distracted driver in 2021, while speeding-related deaths increased by almost 8%, according to the NHTSA.

Insurance implications

The increase in frequency and severity of road traffic accidents has had a major impact on auto insurance profitability globally. The combined ratio for the US commercial motor insurance market, for example, climbed to around 105% in 2022, according to the Insurance Information Institute (III). UK motor insurers paid out a record £2.5 billion in motor claims in the second quarter of this year, up 29% on the same quarter of last year, according to data from the ABI.

Several factors are driving up the cost of motor claims. Social inflation is pushing motor liability claims to new heights in some jurisdictions, especially in the US. At the same time, the cost of repairs is rising with the increased sophistication of vehicle technology, shortage of parts, increased labour rates and longer periods of repair. According to the ABI, the cost of vehicle repairs rose 46% year-on year in the second quarter of 2023, far above the 18% increase in the overall motor claim count.

Unsurprisingly, increased claim trends have made motor lines unprofitable for insurers in many markets, necessitating premium rate increases. US commercial motor recorded premium increases of 10.4% in the second quarter of 2023, marking a milestone of 50 consecutive quarters of premium increases, according to The Council of Insurance Agents & Brokers’ Commercial Property/Casualty Market Report.

Sustainability drivers

Road safety can also be linked to other sustainability areas, notably the health and wellbeing of employees. Driver wellbeing is an often overlooked yet important aspect of fleet management and road safety. In the US, long-haul drivers are 10 times more likely than the average worker to be killed on the job, according to a report from the US Department of Transportation.

Environmental issues, such as the green transition, are another increasingly important aspect of fleet management that also have implications for road safety. Safe driving, for example, can produce environmental and financial benefits, through reduced emissions and fuel consumption, vehicle maintenance and extended battery life, and potentially lower insurance premiums.

The transition to electric vehicles (EVs), while a key component of the drive to net zero, is also a challenge to master. Motor insurance products are generally well suited to EVs, and many insurers have adapted their offering. However, EVs are currently proving more costly to repair. Electric vehicle damage claims are currently 25% higher than their combustion engine equivalents and EVs can take 14% longer to repair, according to research from the UK’s Thatcham Research.

Standing at a cross roads

It is no longer sufficient to passively address the financial consequences of adverse commercial motor claims trends, in the form of claims payments and commensurate rate increases. This would only reduce the availability of commercial motor insurance, increase the economic burden to be shouldered by insurers and their customers, and prolong an unnecessary health crisis.

Neither would it be right to rely on further improvements in vehicle technology. Autonomous vehicles and advanced driver-assistance systems (ADAS) are ultimately expected to reduce the frequency of accidents, but we are far from reaching sufficient levels of autonomy and assistance, let alone for a significant proportion of the global vehicle parc. In addition, improvements in technology and automation may have unintended consequences, such as distracted driving, offsetting expected safety gains.

Fortunately, there are a range of options available now to tackle this problem. Telematics, for example, has been shown to be an effective way of improving driver behaviour and preventing road accidents. Yet uptake in the global commercial fleet is still low. The answer lies in working with insurers that can provide independent advice on the best telematics solutions, and those that can turn ever larger data sets into insights to prompt effective risk management actions.

Double down on loss prevention

Going forward, all stakeholders should adopt a renewed focus on accident prevention and road safety. If they have not already, organisations should implement an integrated safe driving programme. Fleet maintenance, driver selection, training, coaching and wellbeing are paramount, as is a safe driving culture reinforced by senior management.

Businesses and insurers share a common interest in making our roads safer. And this is where risk managers have an important role to play; supporting fleet managers and providing a bridge to insurers, which can help their customers with advice and solutions.

Now is the time to embrace road safety. Doing so is not only financially sensible but also the right thing to do.

Originally published in Commercial Risk on November 7 2023.