Fleet owners with more than 20 units will overwhelmingly purchase Fleet Motor policies with comfort in the security these very broad policies provide. For clients with smaller unit numbers, 5, 10 or even 20 units, the decision of moving from individual policies to a Fleet cover, will require the broker to carefully advise the client.
It is very tempting for a broker to encourage a client’s move from individual policies to a fleet policy covering all of the insured’s vehicles under a single policy. Initially this seems beneficial as there may be overall premium savings, and a reduction in the administration workload seems worthwhile.
But there can be a sting in the tail that brokers should alert their clients to when considering moving to a fleet!!
Many clients or their brokers have the arduous task of managing individual policies with due dates scattered throughout the year.
Each of these policies will have a per vehicle claims history rating, some vehicles on maximum no claim bonus, some on lower ratings if they have been acquisitions or suffered claims.
Some individual policies will even include no claim bonus protection benefit – where the unit will maintain its maximum premium discount even if it has claims.
The coverage under individual policies are generally of a fairly high quality (the Insurance Contracts Act prescribed contracts stipulates minimum standards which are generally offered), but overall, they will be inferior to a Fleet wording.
Fleet policies provide generally broader benefits, including automatic additions cover for purchases and a raft of possible extensions i.e. principles indemnity, 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 the clients cost of claims.
Clients can, however, after a couple years enjoying their new fleet policy, find that the impact of their losses far outweigh the benefit of broader coverage and ease of administration!
Under individual policies the premium no claim bonus impact will be the same for $2,000 or $15,000 claims. And 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 3 or 4 years.
Premium impact under an individual policy may be a move from say a 60% NCB 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.
An insured can’t hide from their loss history under a Fleet policy!!
When this applies to a fleet of 15-20 vehicles producing premiums 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.
A previous article by Fleetsure on re-evaluating a client’s fleet tender outlined some of the strategies that may be considered during the fleet renewal process – see link Broking Commercial Motor Accounts in a Hard Market.