There are many factors that impact the cost of Fleet Insurance. One of the big factors is claims with the insurance industry continuing to experience rising costs of claims due to a number of factors:
– Increased technology in vehicles leading to higher repair costs
– Continued high costs of personal injury and credit hire claims
– The claims culture in the UK; particularly related to whiplash claims as well as credit hire
When we spoke to Anthony Jones Director, Steve Green about Fleet Insurance and what impacts the costs, one of the big themes that he noted around claims costs is that increased technology in vehicles is leading to higher repair costs
“Claims and claims history will have a big impact on the cost of fleet insurance for a number of reasons. A big factor influencing the industry as a whole in recent years is the increased technology being added to vehicles as manufacturers move towards automation and pushing electric vehicles.
As vehicles become more complex, with increasingly complex technology built in such as AEB systems or electric vehicles where you have the addition of the battery which can be damaged in even a minor accident, so do repairs. Repairs become more expensive the more technical that they are. In some cases, we are seeing repair costs soar so high that vehicles are having to be written off even though on the face of it the damage appears relatively minor. More complex repairs are lengthier too meaning vehicles are kept off the road for longer.”
What are the challenges affecting repair costs?
Increased complexity of vehicle technology
The addition of complex systems such as AEB (Autonomous Emergency Braking) systems can mean that calibration costs need to be factored into repair costs to ensure that systems are working as they should be following a repair. Thatcham report that the cost of replacing windscreens for example can increase significantly when factoring these additional costs in.
Batteries in electric vehicles
There has been a recent push by manufacturers to get electric vehicles on the roads. Whilst this is a positive when it comes to emissions and moving away from petrol and diesel vehicles, batteries also pose another challenge when it comes to repairs. Minor bumps can result in the battery of an electric vehicle needing to be removed, reset or replaced – something which has the potential to push repair costs sky high given the complexities and the fact that batteries are still so expensive.
Less Focus on Reparability
As manufacturers release vehicles to the market with more complex systems in a push towards automation and electric vehicles, sometimes reparability is being overlooked. Both in terms of:
Costs – with the use of more complex materials, what would have previously been a simple repair can mean for example, that an entire panel needs to be replaced rather than a small area, resulting in increased costs
Guidelines – repair guidelines, guides which ensure repairs can be completed in line with manufacturer requirements, are being released at a later date than the vehicle in some cases because of the rush to get cars to market. This can result in a delay to repairs process which can add cost. Thatcham report this problem is prevalent across the industry and want reparability to remain a focus for manufacturers.
With the factors above it is clear to see how repair costs are becoming inflated and having a knock-on impact on insurance premiums. Steve goes on “Technology in itself is so beneficial. Where Advanced Driver Assistance systems are installed in vehicles, we see risk management and safety improve. However, the other side to this is the higher costs and longer duration of repair if a vehicle is involved in an accident. The ability to repair vehicles in a cost-effective manor really does need to be kept in mind but given the speed of technological advances it doesn’t always seem that this is the case and the impact on the insurance industry is clear.”
In some cases, technology can unfortunately also cause vulnerabilities in vehicles, leading to more claims and pushing up costs further. Take keyless entry systems for example. There has been a lot of discussion recently about the fact that these systems can leave vehicles more vulnerable to theft, something we’ve blogged about in the past. The onus really is on manufacturers in these situations to ensure that any developments being made to vehicles are well considered
Other factors which may affect the cost of your Fleet Insurance
Whilst repair costs will have a big effect on claims and therefore on the cost of fleet insurance there are other factors which will also play into the amount you pay for your Fleet Insurance
State of the economy
Steve notes that the state of the economy can affect the insurance industry in a number of ways. “At times of recession we tend to see a rise in things like staged accidents and fraudulent activity. Vehicles don’t always get the attention and maintenance that they require in tougher financial times so companies may be running vehicles that need better looking after. As a result, we can see more claims for things like trucks catching fire.”
“On the flipside, in better economic times, there are more vehicles on the road which means the likelihood of accidents increases. Maintenance can also be overlooked in a good economy with companies so busy that they don’t have time to carry out the necessary maintenance.”
“There is a definite claims culture in the UK whereby there is propensity of people to feel they have a right to make a claim. Whiplash claims have been a big issue in the industry for many years now pushing up claims costs and premiums for all. Claims inflation also continues to batter the industry – continued high costs of personal injury claims and credit hire firms significantly pushing up costs associated with hire cars”
Effect of Brexit on Insurance
Whilst we do not yet know exactly what is to happen when it comes to Brexit, there could be implications across the insurance industry. Steve adds “We may see insurers pulling out of the fleet insurance market in the event of a no deal Brexit. Some may feel it is too difficult to affect the changes that a no deal Brexit would require and the ability to make a profit may be more challenging. If insurers do withdraw from the market costs may go up as availability of cover is more restricted.”
Steve finishes “The market really does seem to be at breaking point with regard to being able to provide premiums which are affordable given all the pressures on the industry. There is no insurance industry if it can’t provide cover that people can afford. A breakdown in the risk transfer model is starting to happen as we see more and more uninsured drivers on the road.”
“Fleet businesses need to pay more attention than ever before to risk management and manging health and safety within their business in order to put themselves in the best position to be able to obtain an insurance premium that really does work for their business”
If you are reviewing your fleet insurance needs or want to discuss your fleet management strategy, then do give us a call – we have a wealth of experience in the motor market and have a team of experts who can talk through your business and fleet insurance requirements.