DOSSIER SAFETY
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Intro
HOW TO REDUCE INSURANCE COSTS Jonathan Manning
As fleets search for savings in all areas of expenditure, insurance premiums are an obvious place to start.
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The high fixed cost of fleet insurance will find itself in the crosshairs of businesses as companies emerge from the economic damage caused by COVID19. In broad terms, this leaves fleets with two options: either negotiate lower premiums on current policies; or accept more risk to cut premiums. With premiums based on claims history, fleets should be in a stong negotiating position for 2021, given the lengthy accident-free period while vehicles were in lockdown. However, these improved terms are likely to be short-lived. Insurance premiums have been rising since the Solvency II regulations came into force for insurance companies in 2016, and vehicle repairs have become more expensive due to the complexity of fixing Advanced Driver Assistance Systems.
Pressure on premiums Insurers will also be under pressure to raise premiums in order to compensate for the loss of millions of new motor policies this year due to the collapse in new cars sales across Europe during the pandemic. And heavy losses on insurance lines (e.g. life) hit hard by COVID-19 will intensify pressure to raise prices on all policies, including motor. “We were already in a climate of premium increases and we will get a big increase on top of that,” said Eelco van de Wiel, managing director, fi insurance. Even if fleets do succeed in negotiating cheaper premiums for 2021 as a result of lower claims this year, the savings will be shortlived unless they are accompanied by successful risk management
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strategies. If claims costs in 2021 return to 2019 levels, then premiums in 2022 could exceed pre-COVID-19 levels.
Self-insurance solutions An alternative route to lower insurance costs, but with the potential for longterm savings, is to self-insure. The first and easiest step towards self-insurance is to increase the deductible (excess) for own-damage claims. For larger fleets, recurring own damage repair costs are so predictable that this is more of a budget than a risk, said van de Wiel. “We see fleets increasing deductibles from €500 to €5,000,” he said. “That reduces your premium a lot.” This is not, however, a strategy for the feint-hearted, and van de Wiel outlined
