Fleet insurance: What you need to know

The cost of insuring a car is at an all-time high, with research showing that drivers were hit with a 4% price hike on their premiums in the last quarter of 2017 alone, compared to the rest of the year.

The price increases have had the biggest impact on the premiums of business fleet owners, especially those with vans and larger vehicles, as pay-outs usually have to cover the cost of business interruption if a vehicle is damaged or written off.

Leading independent Nottingham insurance broker, Russell Scanlan, has recorded a growing trend of significant price rises, with premiums increasing by up to 50% for business fleets, hitting those with a bad claims history particularly hard. Here,  Managing Director at Russell Scanlan, Bryan Banbury, explains the causes behind these price increases and discusses the steps businesses can take to help lower their costs.

The claims landscape is changing and for businesses which run fleets of cars and vans, costs are at an all time high. There are a number of factors contributing to this, forcing insurers to increase premiums.

In early 2017 the Lord Chancellor slashed the discount rate (or Ogden rate) – a calculation which takes into account the interest claimants can expect to earn on the amount of compensation money they receive if they invest it – from 2.5% to – 0.75%. This decision shook the insurance industry and was faced with heavy backlash, with the ABI labelling the changes ‘crazy’. The cut rate has meant that lump sum settlements for those injured in car accidents are now much higher, resulting in great losses for insurers’ financial reserves. As a result, they have had to ‘top up’ their pots by drastically increasing the cost of cover for their customers.

Other factors, such as rising costs of long-term after care following an accident, longer life expectancy, increased congestion and more cyclists on the roads also contribute to the level of claims risk and inflated settlement costs.

It is clear that the growing cost of insuring your business fleet is not always reflective of the risk involved with running it, but there are multiple ways you can help bring your costs down.

• Driver selection. Minimising the likelihood of a claim is key – as 39% of all deaths on the roads are work related, insurers will take into consideration who you have driving your business vehicles and more importantly, how they drive. Provide drivers with the opportunity to attend regular safety courses and ensure you can prove that your business carries out detailed background checks, has a thorough interview process, looks up past driving references and checks licences periodically. For more information, read this handy guide from QBE. 
• Technology. Installing black boxes is an effective way to offer both in-depth and real-time insight as well as detailed reports into an employee’s driving behaviours, helping to bring down your premiums. Dash cams are also valuable for ensuring a smooth and easy claims experience, providing clear evidence in the event of an accident and reducing the risk of ‘crash for cash’ claims. For more information on how technology can help your business reduce its insurance costs, read our blog here.
• Health & Safety. Driving should be well integrated into your business’ health and safety policy and in line with current laws. Regularly briefing your staff with well thought-out road safety procedures should help to reduce driver complacency – one of the main causes of road accidents.
• Work Schedules. It is against the law to set tight work schedules which could possibly cause employees to speed or drive dangerously. Think carefully about traffic conditions, road works, peak drive times and speed limits, to prove to your insurance company that your employees have adequate time to get to each stop without speeding and your business sets appropriate risk limits.
• The basics. It goes without saying that it is essential to regularly check braking systems, air bags and other safety features on fleet vehicles to reduce the risk of a serious accident and hefty claims made against your business.  

Ensure these measurers are passed on to your trusted insurance broker, who can use them to fight your corner and hopefully, lower your premium. For more background information on road safety at work, read QBE’s useful guide to motor risk solutions here. 

The battle between insurers and the government to change the widely-contested Ogden rate is ongoing. The Lord Chancellor has revealed tentative plans to raise the rate again at some point this year to somewhere between 0% and 1% – but with no guarantee or set date. There is also concern amongst insurance brokers that these changes won’t change premium prices for customers – as insurers will want to make up for the losses they have experienced over the past year.

We will be sure to keep our clients up to date with any changes in relation to their fleet premiums. If you have any questions, or would like to talk to a member of our team for advice on how to help bring down your costs, give us a call on 0115 947 0032.