At a time of financial belt tightening, how would it boost your career to tell the finance director that you could cut the fleet insurance premiums by half?

Like any insurance policy there will be a few caveats, but the small print is not prohibitive.

For while best practice fleets may be paying a premium of as little as £500 per car per year, others may be funding upwards of £1,200 per car.

Unfortunately there are no quick wins. Driving down insurance premiums is a medium to long-term project because insurers base their premiums on three years of claims history.

Insurers may, however, be willing to accelerate some premium reduction if a fleet can present a coherent risk management strategy and evidence of an improving claims experience.

But first a myth.

Yes, it is possible to reduce premiums by increasing the excess you pay per claim (excesses vary from a typical £250 per claim right up to £50,000, at which level a fleet is considered to self-insure).

Before bullishly moving towards a large excess though, it’s important to remember that the reduction in premiums does not spell a cut in accident costs.

Firstly, you’ll pay the costs up to the higher excess, and secondly you’ll face the time-consuming work involved in resolving an accident, with responsibility for sourcing repair estimates, managing the quality of the repair, paying for it, dealing with any third parties involved, sourcing replacement cars and all the other headaches normally resolved by the aspirin of an insurance company. It’s their core business.

“In the short term the only way to cut premiums is to take more risk,“ confirms Simon Baker, head of commercial motor at Axa Insurance.

“But you are not changing the cost, you are simply moving it from an insurance expense to a business expense.”

Reducing this expense requires a two-pronged approach – cut both the cost and the frequency of claims. For a quicker win, start by targeting the cost of claims.

“When you do have an accident, contact your insurer immediately so that they can reduce third party costs,” says Mike Smith, commercial motor manager at Aviva.

Failure to act in this golden 24-hour window could see the third party resort to an expensive credit hire replacement car, while their vehicle is repaired by a bodyshop with higher charges than one in your own insurer’s network.

The higher the cost of claims, the higher the claims history and the higher the premiums in subsequent years.
“If you can report an accident immediately it helps us to contain the claim costs,” says Smith.

A simple glovebox checklist that instructs drivers what to do in the event of an accident will also help drive down the cost of claims.

“Drivers should have instructions of what to do at the scene of an accident,” says Ron Spore, motor fleet underwriter at insurer Catlin.

“Identify and take photos, even on your phone, of the accident, the damage and the third-party vehicle, and get the details of any witnesses.”

He recommends that each vehicle should carry a card that can be handed directly to the third party, giving them all the fleet insurance details, alongside an offer to provide a replacement vehicle and manage the repair if the fleet driver is at fault.

“Accidents will occur, but if you do that we could take 25% to 30% off claims costs,” says Spore.

If you struggle to secure employee compliance with swift reporting of accidents and the control of third party costs, the solution could be a straightforward finance restructure, suggests motor insurance consultant and trainer Roy Rodger.

“Allocate the accident costs to the department that runs the vehicles,” he says. It’s a quick way to seize the attention of line managers.

 

Minimise claims to lower premiums

Of all insurance, motor insurance is the most sensitive to the previous year’s claims, says Rodger.

By minimising the cost of claims, fleets can optimise premiums for the following year, so strip out of the motor policy additional costs such as the theft of the driver’s personal effects or hotel bills if the driver is stranded.

The costs can be covered by an alternative policy or business expense, leaving the fleet claims experience looking as low as possible to insurers.

All the experts agree, however, that reducing the size of your claims history can only go so far, and that the long-term solution has to be a substantial reduction in claims frequency.

“Start with the current claims history, break it down, and look at the lessons that can be learned,” says Spore.

There may be some easy wins.

One fleet of milk floats, for instance, slashed its claims record in half by switching the direction of its delivery round from clockwise to anti-clockwise!

Why? Under the new plan at every T-junction the floats turned left, rather than right, thereby avoiding the need to cross a lane of oncoming traffic.

Reducing insurance claims

But in the majority of situations it will be drivers rather than routes than need resolving, given that the most common claims are running into the rear of another vehicle, junctions and roundabouts and damage while parked, says Doug Jenkins, motor fleet risk manager, at QBE European Operations.

“The first two can be dealt with by a risk assessment and driver education process. The last one is quite often damage while driving, but reported as damage while parked.

"This can be dealt with by investigating and exposing the incorrectly reported.”

The holy grail is a fleet safety culture accepted and respected throughout an organisation.

For Mike Smith at Aviva this can start at the recruitment of new staff. Check licences and remember that, “young drivers have more claims and bigger claims because they tend to be driving at higher speed”.

General Motors, for instance, discovered that young drivers represented 6% of its fleet population but accounted for 30% of the annual claims cost.

“We do not give a premium saving before we see an improvement in the claims experience,” says Spore.

“But if a client agreed to undertake a whole programme of risk management we might cut the premium by 15% and offer a rebate of a further 10% if the claims costs do come down, subject to a renewal of the policy.

"Once they have three good years of claims history the savings in premium could be as high as 40% to 50%, down from say £1,200 per vehicle per year to £500."

 

General Motors cuts premiums by 20%

Car giant General Motors has achieved a 20% reduction in its insurance premiums in the UK following a comprehensive risk management programme.

The initiative across its 600-strong fleet has also halved the number of crashes in which its company drivers were involved.

The programme was championed from board level downwards and involved the firm’s insurer, employees and trade unions to develop a best practice model for road safety.

“The model is aimed at reducing the collision rate of the fleet still further, reducing the risk of harm to employees and other road users, meeting all relevant legislation, meeting our corporate social responsibility and reducing the direct cost associated with motor collisions,” says chairman Bill Parfitt.

GM UK’s fleet safety initiatives:

  • A revised and comprehensive safe driving policy
  • A driver handbook, which includes detailed safe driving and insurance information
  • An in-depth fleet safety audit to identify improvement areas
  • A minimum driving age of 22 years with ‘awareness training’ for employees below that age
  • Work-related road risk assessments for all employees who regularly drive on business with follow-up individual in-vehicle/classroom training for drivers where a specific risk was identified
  • An online training programme for business drivers
  • A ‘no licence, no car policy’ with employees not allowed to collect a vehicle without showing their driving licence at each collection
  • A post-collision investigation process between driver and line manager to identify the root cause and agree measures to prevent reoccurrence

GM is one of more than 40 organisations that have signed up to the Driving for Better Business campaign run by RoadSafe – www.roadsafe.comm could be as high as 40% to 50%, down from say £1,200 per vehicle per year to £500.”

Occasional Business Use policies can offer firms extra protection

With a significant number of employees opting out of a company car scheme, firms face a potentially serious insurance issue if they ever drive their private cars for work.

In such instances, employers have a duty of care to ensure that their staff properly maintain their private cars and insure them for appropriate business use.

However, many employers will also take out an Occasional Business Use (OBU) policy to cover any corporate liability arising from private car drivers being involved in an at-work accident.

OBU is useful if the third party pursues a claim against both driver and employer, especially if it problems surface with the driver’s individual insurance.

Simon Baker, head of commercial motor at Axa Insurance, says: “A corporate OBU policy can cover drivers in private cars, provided they are disclosed to the insurer with details of the risk exposure, such as the vehicle, mileage and driver.

"But if a significant mileage is carried out, then the employer has a responsibility that the ‘workplace’ – i.e the car – is safe.”