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INSURANCE: 10 fleet questions answered
Date: 02 February 2010
BusinessCar's focus on the different sectors of the fleet industry this time looks at the insurance market and answers 10 key questions involved in getting your fleet covered without it costing the earth. Paul Barker reports
1. How many types of fleet insurance are there?
The first task to undertake when hunting for insurance cover for a business fleet is to see what's on offer. Luckily for fleet operators, this is a fairly simple operation, as, unlike many other sectors, there aren't vast portfolios of products and alternatives to wade through.
"A mix of cars, commercial vehicles and mobile plant can all be covered under a single fleet policy," says Al Denness, regional manager south for Swinton commercial. Since 1930, every vehicle on UK roads is required to have at least third-party insurance, and the options of third party only, third party with fire and theft cover or fully comprehensive insurance that are available for private individuals insuring their family car are similarly open to businesses.
Mike Smith, commercial motor manager, Aviva, says: "In the main, as far as Aviva is concerned it is a simple fleet product for 25 cars through to the likes of 100 trucks."
2. What types of fleet can best utilise self-insurance?
Self-insuring is an alternative to traditional vehicle insurance policies. It's something to be taken up on a company-by-company basis, and involves either lodging a £500,000 sum with the Government that works as a bond, or effectively buying the most stripped-out basic cover from an insurance firm, then using the savings to pay for any claims that may occur.
"Those fleets serious about managing risk can see cost savings," says Andy Price, practice leader - motor fleet at Zurich. "If self-insurers are not paying a premium but paying for every collision, it focuses the mind of the line manager rather than the finance department. If you self-insure then everyone in the business is more focused on the cost of collisions and preventing them.
Al Denness of Swinton says companies wishing to review their cover levels should work with an insurance broker to consider the most suitable level of cover. "Larger firms may decide they have the capital to absorb a degree of vehicle loss or damage and may decide to select comprehensive cover but increase their own vehicle damage excess from a typical level of £250 to say £1000 in exchange for a lower insurance premium," he says. "Alternatively, they may decide to select third-party-only cover and self insure all own vehicle losses."
"Generally, only the largest risks will go down the route of self insurance options," according to Lorna Curran, portfolio underwriting manager - commercial motor at RSA. "Such fleets will already be focussed on claims costs management and good risk management practice to ensure their own insurance retention costs are controlled.
"Self insurance is really only an option for the largest companies with hundreds of vehicles and will also be dependant on each company's own financial circumstances/strength, as this route is very much a strategic decision."
3. What mistakes do fleets make?
Not being insurance experts, there are a range of things fleet operators are not getting right, which have an impact on premiums. Andy Price of Zurich complains about a lack of detail coming out
of companies, either about the vehicles themselves or the risk management steps fleets are taking to attempt to minimise collisions. "The more an underwriter knows, the more they can take into consideration," he says.
Aviva's advice is to cover off the basics. "Make sure you check references, licences etc, and that extends to agency drivers, either regularly or driving as holiday cover," says Mike Smith.
The basic matter of controlling and managing claims isn't currently done well enough, according to Al Denness of Swinton. "We would encourage fleet managers to control and manage their claims experience and ultimate premium costs," he says. He pinpoints the key areas of analysing claims experience and understanding where and why claims are occurring then implementing a risk improvement plan by setting guidelines for managing and controlling the use of fleet vehicles.?That should be followed by ensuring long-term improvements in claims experience are maintained by ongoing monitoring and reviewing the system of controls.
4. What are the biggest influences over insurance premiums?
The key factors are the level of cover selected, level of self insurance from £250 accidental damage excess to £5000, business address postcode, claims cost over three years, claims frequency over three years and the type and value of vehicles, according to Swinton's Denness.
"Risks with high frequency of claims and higher claims costs will always pay higher insurance premiums," is the view of RSA's Lorna Curran, who says that a risk management policy may not make an immediate difference but firms will reap the benefits in years to come as their premiums fall along with their accident rate.
"Three-quarters of the premium an insurer collects is covering claims," says Smith of Aviva. "There are lots of things a fleet can do to manage a claims bill, even with the claims they have. Report it as fast as you can to your insurance company. It helps the insurer manage third-party costs in particular, such as legal bills and replacement vehicles in the case of at-fault accidents. The sooner the insurer knows, the more they can do to manage down the cost of a claim, which will have more influence over a premium the following year."
Price also recommends the logical steps of higher excess or less cover to keep premium payments down, while Zurich's Curran points to other factors affecting the premium including high mileage, road time, European exposure and the age and experience of drivers.
