The simple answer is two. But, really the more the merrier. Only a couple of insurers allow for as few as two and, as with any market, the more you limit the providers, the higher the costs. Most insurers allow for a mix of cars and commercial vehicles, sometimes including special types (diggers, tractors, forklift trucks etc). So what do you need to know about business fleet insurance and is it worth it?
Vehicles:
Vehicles must be owned or leased by the company, although vehicles owned by directors are usually allowed but must be declared to the insurer. It is important to know that no claims bonus earned by a director can be used to help with the fleet premium but once relinquished, you do not get the opportunity to get it back for personal use. Should you need something to use against a personal vehicle in the future, some insurers will provide an introductory discount based on the driver not having been involved in any reported incidents on the fleet policy.
Drivers:
Policies are normally issued on an “any driver” basis, subject to an age restriction. “Any driver” is one of the most misunderstood terms used in insurance as it really does not mean “any.” Mostly, drivers must be within the age limit imposed, have held a full UK driving licence appropriate to the vehicle for two years, be free of motoring and unspent criminal convictions and have a reasonable claim history including in their personal vehicles. Drivers who do not neatly fall into those categories can be considered but additional premium or terms such as an increased excess may apply. As with any other types of motor insurance, insurers prefer older drivers so policies can be limited to over thirty or over twenty-five. A very few insurers will issue policies for over twenty-one or over twenty-three. Anybody falling outside of the criteria may be allowed on a “named driver” basis.
Use:
Use for the business of the company is standard. Usually, personal use for drivers such as commuting, shopping etc. is included although some businesses prefer that vehicles are either left on the premises or, at best, used to commute only. Commercial use other than that of the insured business is not permitted.
How does fleet insurance work?
The fleet market is divided as follows, depending on the number of vehicles and the way in which the insurers rate the risk:
- Mini-fleet: 2-15 vehicles. The rating is based on the “book rate,” i.e., what the cost would be considering the type of vehicle, drivers, earned no claims discount less a bulk discount. That discount varies according to the overall claims experience (see below).
- Traditional fleet: 15+ vehicles. This type of policy is very much dependent on the claims experience (see below). The premium per vehicle is typically flat-rated, i.e., the same premium applies to all vehicles or all vehicles of the same type insured on the fleet schedule. Any vehicles added are at the same premium so there is no wait to build up a no claims discount. Policies are often on a declaration basis, so you just tell the insurer every three or six months of any changes which reduces administration costs.
Claims experience:
Standard motor insurance usually depends on there being a no claims discount to consider. Fleet insurance depends on the claims experience over three or five years. Insurers are looking at a number of factors:
- Vehicle type – insurers usually prefer a range of vehicles so that they will be OK with the MDs high-end car but like to see some more mundane vehicles for balance. At the time of writing, electric vehicles can be an issue. Some insurers will not insure them at all; some will apply higher excesses. This may change as use of EVs becomes more widespread but now there are concerns about repair costs, issues with pedestrians and cyclists not being able to hear them approaching, reports of fierce fires:
- Fleet stability – it is difficult to rate if the number and type of vehicles is changing significantly:
- Accident frequency: this relates to the number of vehicles. Anything over a 50% accident frequency – if there are ten vehicles, then 5 claims may be considered acceptable. More than that can lead to higher premiums. Insurers can also insist on one or all drivers being required to undertake additional driver training.
- Claims cost: this is a difficult one. Insurance is a business and insurers are no different from any other business in not wanting to lose money. The actual cost of an accident is a matter of chance, so a single high-cost accident is likely to receive a lower premium weighting than a poor accident frequency. Claims for windscreen repairs are included in the overall costs, unlike standard motor insurance where such claims are not subject to loss of bonus:
- Business type: a taxi or coach fleet is likely to be more costly due to the personal injury aspect as well as the higher annual mileage per vehicle.
Deciphering a claims experience is quite a scientific process. For example, there is a column for number of vehicles. This is often not a whole number. For example, if the business has insured five vehicles at the start and not had any changes, the claims experience may show something like 4.7. This is because the claims experience must be made available in sufficient time before the renewal date so the as-yet unused portion of the year is taken into account.
So, is business fleet insurance worthwhile for a company to have? Overall, yes. Premiums are generally cheaper than they would be by insuring the vehicles individually. There is usually less administration for the business, the insurance broker and the insurer. Insurers will appreciate that having vehicles on the road is important to the business and will do what they can to turn repairs around quickly. Making use of an insurance broker that understands business and has access to a wide range of insurers is essential for this type of insurance. Please contact one of our experts or give us a call on 01442 242400 today.
