Fleets face insurance cost rise

Companies that do not have tight controls over driver and vehicle safety face rising insurance premiums or the risk that some insurers will not offer them any coverage.

Experts speaking at a Hammonds LLP roundtable, chaired by Fleet News, believe the age of ever falling insurance premiums is nearing an end as claims costs continue to mushroom.

The last rise in premiums was back in 2002 since when prices have fallen year-on-year.

Although experts have been forecasting an increase for a number of years, change is now imminent.

“Claims costs are rising so prices will increase – possibly next year, possibly the year after,” said Mike Ellis, executive director – claims and development at Heath Lambert Retail.

“Fleet is usually the first to turn because the margins are so thin. For some, coverage will be harder to get.”

Companies are already facing tougher stipulations on their policies, as insurers look to offset falling margins by tightening the rules on non-disclosure.

“What often goes with the lower price is a requirement for more thorough information to be provided,” said Ellis.

“Any non-disclosures mean the claim will be at risk and the insurance companies will look at this more and more if the price continues to fall.”

Insurers are also starting to examine the fleet policy much more closely before they determine premiums.
In return for offering coverage at a competitive price, they will mandate criteria designed to reduce claims, manage risk and prompt behavioural change with drivers.

Fail to agree and either the premium will rise or the insurer will refuse to offer coverage.

David Bolger, risk analyst at J Sainsbury, said: “It’s a culture and a top-down approach. Risk management and driving colleague safety is something that we focus on and that is reflected in our premiums.”

Fleet can also consider higher excesses, which will reduce premiums and enable the company to invest the money elsewhere in the business.

However, if they don’t control accidents, their total costs will increase.

“Companies that are confident in their controls will take a bigger chunk of the risk with the excess,” said Ellis.
However, companies that use agency drivers face the biggest risks.

Although the agency has a duty to do due diligence, the company is still responsible for safety as it’s their vehicle and business.

“Agency drivers are bad news from a risk perspective,” said Scott Ingham, director at Matrix Global Services.

“The correlation of incidents relating to them makes them a higher insurance risk and financial risk.”

He added: “Foreign nationals can be an issue if they fly in, do a task and then leave. They might be on six-month contracts where employers give them no training or don’t check licences.”