Is fleet insurance the best option for your client?

FLEET owners with more than 20 vehicles will overwhelmingly purchase commercial and heavy motor vehicle fleet policies, taking comfort in the security these broad policies provide. However, for clients with smaller fleets, the decision of moving from individual policies to a single fleet policy requires careful consideration. 

While it is tempting to replace numerous policies throughout the year with a single fleet policy to reduce administration and premium costs, it must be remembered that each of these policies will its own claims history rating. Some policies will have a maximum no-claim bonus (or even a no-claim bonus protection benefit), while some will have lower ratings if claims have been made.

On the plus side, fleet policies tend to provide a high level of cover, including automatic cover for additions, principal’s indemnity and employee’s vehicle cover. The administrative ease of a common due date is also of great value to most clients.

Fleet policies are primarily underwritten based on their loss history. Very simply, the fleet premium will incorporate most, if not all, if the client’s claims. After a couple of years, the accumulative impact of their losses can far outweigh the benefit of broader coverage and ease of administration!

A $2,000 or $15,000 claim will have the same impact on a no-claim bonus premium. If a lifetime no-claim bonus is in place, these losses may not result in any premium variation at all. Whereas under a fleet policy, the premium rating will expect the client to pay back that loss, whether $2,000 or $15,000, over three or four years.

Premium impact under an individual policy may be a move from say a 60% no-claim bonus at $700 per unit to 40% at $1,000. Under a fleet rating, the full impact may see the per unit premium increase from the $700 premium to $2,000 per unit. Put simply, the insured can’t hide their loss history under a fleet policy!

When this applies to a fleet of 15–20 vehicles producing a premium of $30,000 to $40,000, it can be very tempting for the client to consider returning to individual policies and purchasing from the numerous direct online insurers.

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