Do TOCs self-insure for delay-repay?

[enginedin]

This might be a very quick question to answer from someone more in the know...

I was caught up in severe disruption on the East Coast a few weeks ago - the figure I heard was that 10,000 passengers were displaced, and there were lots of taxis used. This was an event for which there would have been no third party insurance LNER could claim against.

If we make some very hand-wavy assumptions:

- average cost of ticket for delay repay: £100
- 25% of passengers needed a taxi; taxi loading of 2 (to account for differing destinations); average taxi cost £300 (based on late night taxi cost between 2 LNER stations)

then LNER are easily at a £1.5m cash payout.

Is this just rolled into turnover (noting it seems their turnover is currently in the hundreds of millions), or do they have insurance for this kind of situation?

 

[Djgr]

This might be a very quick question to answer from someone more in the know...

I was caught up in severe disruption on the East Coast a few weeks ago - the figure I heard was that 10,000 passengers were displaced, and there were lots of taxis used. This was an event for which there would have been no third party insurance LNER could claim against.

If we make some very hand-wavy assumptions:

- average cost of ticket for delay repay: £100
- 25% of passengers needed a taxi; taxi loading of 2 (to account for differing destinations); average taxi cost £300 (based on late night taxi cost between 2 LNER stations)

then LNER are easily at a £1.5m cash payout.

Is this just rolled into turnover (noting it seems their turnover is currently in the hundreds of millions), or do they have insurance for this kind of situation?

I would be amazed if they insured it. It's just a cost of doing business, just like shrinkage is for retailers. Over the course of a year or so, the figure is probably fairly predictable and calculable.

In terms of your figures, I would be surprised if more than 50% of passengers affected actually claim. On average, I believe the figures for delay repay claims is closer to 20% (although somebody in the know can correct me)

 

[thedbdiboy]

The finances of TOCs are nationalised. Delay Repay is underwritten by the taxpayer. In some cases some costs can be recovered from third parties which may be insured.

 

[iamraymond]

This might be a very quick question to answer from someone more in the know...

I was caught up in severe disruption on the East Coast a few weeks ago - the figure I heard was that 10,000 passengers were displaced, and there were lots of taxis used. This was an event for which there would have been no third party insurance LNER could claim against.

If we make some very hand-wavy assumptions:

- average cost of ticket for delay repay: £100
- 25% of passengers needed a taxi; taxi loading of 2 (to account for differing destinations); average taxi cost £300 (based on late night taxi cost between 2 LNER stations)

then LNER are easily at a £1.5m cash payout.

Is this just rolled into turnover (noting it seems their turnover is currently in the hundreds of millions), or do they have insurance for this kind of situation?

Yes, it is booked against revenue per IFRS 15 (accounting standard for contracts with customers).

Their revenue is over £1bn

 

[Merle Haggard]

I would be amazed if they insured it. It's just a cost of doing business, just like shrinkage is for retailers. Over the course of a year or so, the figure is probably fairly predictable and calculable.

In terms of your figures, I would be surprised if more than 50% of passengers affected actually claim. On average, I believe the figures for delay repay claims is closer to 20% (although somebody in the know can correct me)

After delays, some conductors and train managers make it clear that passengers are entitled to claim delay repay.
A cynic might regard the parameter for announcement usually being when another party other than the TOC of the crew is responsible - sometimes, this is heavily emphasised. If so, this shows a lack of understanding of delay/repay, the TOC of the passenger claiming pays it regardless of causation, though of course the TOC may receive recompense via delay attribution but it's unrelated to the number of passengers affected.
When the crew remain silent and the delay is considerable (>2 hours) I do outline, in the conversation to fellow passenger/s that usually arises in these circumstances, that delay repay can be reclaimed and they are always surprised and didn't know.

 

[Starmill]

Most train companies have an enormous daily taxi bill to transport their staff around, both pre-planned and reactive. The additional costs of needing to use them, or ordering emergency minibuses, occasionally arranging a hotel room etc, for transporting a few passengers is likely to just get lost in the noise of the alternative transport contract.

Claims paid out as a result of compensation for delays, consequential losses, settlements, customer service ex gratia payments, etc are likely to be accounted for differently.

If infrastructure fails there are already mechanisms for recovering money from Network Rail as a consequence.

 

[thenorthern]

It's important to remember that most of the delays are caused by Network Rail, meaning they have to pay not the TOCs.

It's also important to remember that most passengers don't claim delay repay.

 

[AlterEgo]

It's important to remember that most of the delays are caused by Network Rail, meaning they have to pay not the TOCs.

It's also important to remember that most passengers don't claim delay repay.

Network Rail does not pay delay repay nor reimburse TOCs for delay repay. Schedule 8 doesn't have anything to do with what delay repay is claimed, it is there to offset the financial risk of the potential loss of future business owing to disruption.

 

[LowLevel]

After delays, some conductors and train managers make it clear that passengers are entitled to claim delay repay.
A cynic might regard the parameter for announcement usually being when another party other than the TOC of the crew is responsible - sometimes, this is heavily emphasised. If so, this shows a lack of understanding of delay/repay, the TOC of the passenger claiming pays it regardless of causation, though of course the TOC may receive recompense via delay attribution but it's unrelated to the number of passengers affected.
When the crew remain silent and the delay is considerable (>2 hours) I do outline, in the conversation to fellow passenger/s that usually arises in these circumstances, that delay repay can be reclaimed and they are always surprised and didn't know.

It's built into the contracts for the TOCs to make sure delay repay is reasonably announced when triggered. It is built into initial and ongoing assessments.

 

[AlterEgo]

The other part of the equation is that delay repay is something around 1% of revenue. It's really a drop in the ocean and part of the cost of doing business. GB rail fare box alone (not factoring in other income streams or subsidy!) is something like £12bn and delay repay last year was £150m.

That's like me running a shop and having to give refunds for one in every 100 items sold because they were faulty.

 

[Starmill]

It's built into the contracts for the TOCs to make sure delay repay is reasonably announced when triggered. It is built into initial and ongoing assessments.

It's been made a condition of licence now as well, so even Lumo or any other new third part operator would be obliged to make passengers aware of the availabile compensation routes, even if the only thing they were entitled to were the minimum level set out in NRCoT.

 

[Tetchytyke]

It's important to remember that most of the delays are caused by Network Rail, meaning they have to pay not the TOCs.

To be pedantic, Schedule 8 payments from Network Rail to the TOCs have nothing to do with Delay Repay. The TOCs are very clear on this, as well they should be: the amounts they receive from Network Rail in Schedule 8 payments far exceed the amount the TOCs then have to pay to customers in compensation, for entirely understandable reasons.

Also, it isn't that the delays are caused by Network Rail, it is merely that the delays are attributed to Network Rail.

There are a lot of things which are completely outside the control of Network Rail which are attributed to Network Rail for Schedule 8 purposes.

 

[Merle Haggard]

It's built into the contracts for the TOCs to make sure delay repay is reasonably announced when triggered. It is built into initial and ongoing assessments.

I was on an EMR Intercity service late Autumn last year (PHBT) and at no point during the delay (of two hours) nor on arrival at the next station where the train terminated was any mention of delay repay announced. As passengers left the train I asked the person who had been sitting opposite me whether they realised that they could claim delay repay and they were completely unaware of the possibility.
to be fair, I have heard more customer focussed EMR IC TMs make excellent announcements when the train's delayed.

 

[Djgr]

I was on an EMR Intercity service late Autumn last year (PHBT) and at no point during the delay (of two hours) nor on arrival at the next station where the train terminated was any mention of delay repay announced. As passengers left the train I asked the person who had been sitting opposite me whether they realised that they could claim delay repay and they were completely unaware of the possibility.

Indeed, although I believe that there is a degree of automatic delay repay knocking around these days.

 

[JohnofWessex]

In the case of a bridge strike or similar is delay repay recovered from the third party insurers?

 

[Bishops]

Indeed, although I believe that there is a degree of automatic delay repay knocking around these days.

Sure is - I was caught up at the start of disruption at kings cross on Tuesday morning and by the time i had made it back to bishop there was an email from LNER asking me to claim via clicking on a link . pretty impressive stuff to be fair

 

[Bertiethebobby]

The other part of the equation is that delay repay is something around 1% of revenue. It's really a drop in the ocean and part of the cost of doing business. GB rail fare box alone (not factoring in other income streams or subsidy!) is something like £12bn and delay repay last year was £150m.

That's like me running a shop and having to give refunds for one in every 100 items sold because they were faulty.

Therefore not much of an incentive to provide a decent service when it's a lot easier to just pay compensation.

 

[Haywain]

Therefore not much of an incentive to provide a decent service when it's a lot easier to just pay compensation.

It's actually much easier to run a good service but the nature of our railways makes that extremely difficult.

 

[AlterEgo]

Therefore not much of an incentive to provide a decent service when it's a lot easier to just pay compensation.

Delay Repay is not an incentivising mechanism. It is merely a way of compensating customers for inconvenience. The railway has other financial levers which are far more important in attempting to achieve the goal of "decent service". I've already mentioned Schedule 8, for example, and there's also Schedule 4 which deals with planned service disruptions too.

Your logic here is that if I have to refund 1 in every 100 things I sell because a customer complains that it's faulty, that low level of obligation to give a refund is evidence that I am not incentivised to ensure I deliver working goods. And without considering that perhaps my shop is regulated by some agency which automatically tracks my performance on a much more granular scale and automatically invoices me for even minor indiscretions that no customer complained about.

 

[iamraymond]

Therefore not much of an incentive to provide a decent service when it's a lot easier to just pay compensation.

Incorrect, how would refunding an entire fare due to simplicity be an incentive? They simply wouldn't be able to operate at all if it was free.

 

[Haywain]

In the case of a bridge strike or similar is delay repay recovered from the third party insurers?

No, any financial recovery from the party at fault for the bridge strike would be completely unrelated to Delay Repay payments by TOCs.

 

[kw12]

No, any financial recovery from the party at fault for the bridge strike would be completely unrelated to Delay Repay payments by TOCs.

Does Network Rail obtain financial recovery for bridge strikes? If so, does the amount recovered include anything relating to the disruption caused, eg the Schedule 8 payments? Or are any amounts recovered solely for direct costs inspecting and repairing any physical damage to the bridge?

 

[iamraymond]

Does Network Rail obtain financial recovery for bridge strikes? If so, does the amount recovered include anything relating to the disruption caused, eg the Schedule 8 payments? Or are any amounts recovered solely for direct costs inspecting and repairing any physical damage to the bridge?

Business's have disruption insurance for lost revenue in all manner of events (including terrorism!?!), I'd assume Network Rail would have some sort of mechanism to recover an amount.

I might read the small print of my motor insurance to see as there's no football for me today!

 

[Starmill]

Does Network Rail obtain financial recovery for bridge strikes?

Yes, claims for consequential losses as a result of negligence while driving are an option which is open to them to pursue.

See Conarken Group Limited and Farrel Transport Limited against Network Rail (2011) [Court of Appeal in England and Wales, Civ 644]:

It did not follow that they had to be accepted, however; schedule 8 had obviously been drafted responsibly and with a view to achieving a fair result, in the public interest, as between the parties to it.

Accordingly, the defendants should be liable for each of the heads claimed.

It had been reasonably foreseeable that, if the track was damaged, the services of the TOCs, and their value to the public, would have been diminished, and that arrangements would have been put in place by the franchising authority to penalise the TOCs for the diminution in their services.

Accepting the care with which the calculations had been made, schedule 8 fell on the side of recoverability (see [68], [69], [78], [82], [86], [102] and [148]-[158] of the judgment).

Negligence

Duty to take care - Economic loss - Damage to property Network Rail Infrastructure Ltd v Conarken Group Ltd; Network Rail Infrastructure Ltd v Farrell Transport Ltd: CA (Civ Div) (Lord Justices Pill, Moore-Bick, Jackson): 27 May 2011 ...

www.lawgazette.co.uk

The full text of the appeal is here: https://www.bailii.org/ew/cases/EWCA/Civ/2011/644.html

This is in addition to likely committing an offence, and risking their own driving licence, in the case of pofessional drivers (bus, coach, lorry and so on) who negligently damage Network Rail's property, they are also putting their company's licence at risk before the Traffic Commissioner.