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When it comes to insuring your fleet of vehicles, going it alone could save you a fortune in premiums, as Tom Webster reports
A company that claims to be self-insured is not being strictly truthful. Self-insurance officially requires the company or individual to deposit a sum of money with the Government before they can take care of all of their accident costs.
Given the sum of money is a not too trifling £500,000, it's not surprising our enquiries showed nobody is currently using what is an antiquated scheme.
The more common and user-friendly method doesn't require anything like this sort of up front investment. In fact, it even involves the one thing the original self-insurers were probably trying to avoid - an insurance company.
The simple, traditional premise of self-insurance is that a company doesn't pay monthly premiums to an insurer, and uses the money saved to cover the cost of any accidents that occur. The modern version works along the same sort of lines, but with the safety net of an underlying insurance policy.
In effect, the fleet's insurance policy is just the same as any other but with one change. By taking on a larger retention, or excess - the amount the claimant contributes toward a crash - the monthly payments are drastically reduced. The company then covers any incidents costing less than this amount, only calling in the insurance company for any substantial claim above it.
Removal firm Pickfords currently has its excess set at £10,000 and has used this form of self-insurance for 20 years. As well as covering their motoring insurance, companies often use this system to cover other areas such as employee and public liability.
"A £10,000 retention mops up the majority of insurance costs," says Pickfords spokesman Steve Harris, but some companies have been said to set the figure as high as £50,000.
The benefits are clear. With a well-trained fleet of drivers, minor bumps and scrapes can be cut right down, if not eliminated. If this happens, you could be going months without claiming on an insurance policy to which you regularly pay large sums.
Care does have to be taken to make sure the cost of dealing with an accident doesn't spiral out of control. Without an insurance company to monitor the other party involved, this could easily happen.
Andrew Fletcher, head of commercial motor at insurance company Groupama urges caution, particularly for larger fleets. "Whilst it remains true that many repair centres will provide an exclusive service to customers at a rate lower than can be agreed with an insurer, larger fleets with multiple locations struggle for such economies," he said. "If the frequency of claims increases, then businesses will be forced to bear the brunt of the cost of all repairs to their own vehicles."
Thankfully there are companies that can help. Accident-management company Total Accident Management claims self-insured fleets can save an average of £424 on each accident they cause. They get in touch with the person your driver has crashed into and control everything necessary to get their car back on the road. With Total estimating the average accident victim spends £310 more than necessary on a hire car, the service could easily pay for itself through the savings it provides.
In theory, any insurance company can provide a self-insuring policy, but it is worth shopping around to start off with. From there on, Pickford's Harris suggests it is worth building a relationship with your insurance company, saying: "You get a better deal in the corporate insurance sector if you show loyalty."
This may mean that the best port of call is your current insurer. But a few tweaks to your policy and the right organisation could see substantial savings.
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