From fuel costs to health and safety, companies with vehicle fleets have seen costs spiraling in recent years. One way to manage costs is to examine current insurance policies, with a view to obtaining lower insurance quotes and thus reducing the costs of premiums. Peter Blanc from Oval Insurance Broking outlines a number of ways that insurance costs could be curtailed and details how a structure of payments, using premium financing options might benefit a company in these days of restricted cashflow.

When looking to reduce insurance costs, the most important thing to remember is that the better a fleet is run, the lower the incident rate is likely to be, and of course, incident history is a large factor in determining insurance premiums. Whether your business has a fleet of lorries or company cars, managing incident rates is the best place to start when looking to get cheaper insurance. The most practical way to do this is to move towards better management of drivers' behaviour through some basic but very effective measures.

In addition to changing driver behaviour a closer look at the company's incident profile and current insurance coverage may reveal opportunities.

If you think your incident record is in order and you still need to reduce premiums, you can consider reviewing the level of insurance you take out. It is actually more common for companies to be over-insured for their vehicle fleets than under-insured, so it might be that the amount you are paying for insurance exceeds the costs that could be manageably covered by internal budgets in the case of an accident.

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If this is the case, it might be worthwhile taking some of the risk in-house. This is sometimes called 'self insurance' and the easiest way to do this is by increasing the excess on the insurance policy. Typically, excesses on a car fleet can be as low as £250, which for most companies operating a fleet of company cars is not a significant sum of money. If a company increases its excess to, say, £1,000 or even £2,500 then they would be likely to see a significant premium reduction. By investing some of the money saved in the insurance premium the company will have the funds to cover any increased excess payments. Companies can also offset the increased excess by implementing a policy whereby staff covers a percentage of the excess in the case of a 'fault' accident which not only lowers costs but also encourages safer driving. This principal can also be applied to commercial vehicle fleets, but of course, when dealing with larger numbers of vehicles, the excesses and money that should be ring fenced to cover costs will be higher.

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If a vehicle fleet is fairly low value then a company can consider taking third party insurance only. Third party insurance is usually only 80-85% of the cost of fully comprehensive premiums and therefore offers a saving of around 20%. For example, if your typical fleet insurance premium is around £25,000 and the typical value of each vehicle is £5,000 then you would need to have more than one vehicle written off per year to be worse off under a third party scheme.

A £25,000 insurance premium would typically cover 20-50 vehicles comprehensively, depending on the claims history. A well-run fleet would usually expect to see a 'write off' rate of around 1 in 200 vehicles, so losing out because of third party insurance is fairly unlikely in a well managed fleet. If you look at your track record and determine how many write-offs or significant damage claims occurred over the past five years, this will help to give you an indication whether this is a beneficial option.

Try catastrophe risk insurance

Larger fleets, especially commercial fleets, can consider taking the self insurance principle a step further and taking out a policy which covers only what is called 'catastrophe risk', where there is a very large write off, or unusually high run of claims. Your broker can help establish how much self insurance your business can afford by looking at claims and premium history. If for example, you typically have a write-off every three to four years and self insurance can save you the equivalent of one write off per year then it is likely to be worth considering.

If cashflow is an issue when it comes to settling the insurance bill, don't forget that many insurance companies will offer interest-free or low-interest instalments across 10 or 12 months which can help to spread the cost.

But the following basic points for drivers can be most productive.

• Make it company policy that drivers mustn't drive for more than three hours without a break (ideally a break should be taken every two hours) and they should be at the wheel for no more than six in 24 hours. Obviously certain professions would make this impractical, but for most forms of employment, it is achievable. Where practical, this is a very effective way to manage tiredness that can lead to accidents. For commercial fleets, there are legal guidelines and laws for minimum rest breaks for lorry and coach drivers, and these should be proactively enforced by employers, but equally, executives driving to conferences should also be aware of the importance of breaks.
• Consider sending staff on a driver training course if they have been involved in an accident, and, if the budget can stretch to it, even if they haven't.
• Keep a close eye on vehicle maintenance; make sure all vehicles are road-worthy and fit for purpose at all times.
• Make sure that all drivers have a hands free kit for their mobile telephone in the car, since even banning staff from using mobiles whilst driving is likely to be unenforceable.
• If you have a fleet of lorries, consider investing in vehicle telematics systems. Some of these systems are incredibly sophisticated and can monitor drivers habits, such as driving for too long or too fast, allowing management to take action if rules are broken. The latest systems also have accident sensors built in, which can measure the speed and direction of travel in an accident, which can be enormously helpful when defending a claim. For example, if someone reversed into one of your vehicles and claimed that your vehicle hit them, if you can prove using telematics that your vehicle was stationary at the time, it will add a significant amount of weight to your case.
• Make sure you control who is driving your fleet of vehicles. For example, you could restrict employees' children from driving company cars or forbid it altogether. Additionally, if it is practical for your business, to restrict drivers of company cars to those over 25, this is likely to have an immediate impact on your premiums.

Finally, consider fitting trackers to all high-risk vehicles, as this is something insurers tend to look on kindly when assessing premiums.

Of course, nobody can predict when accidents will happen and insurance is important in ensuring peace of mind when your company runs a fleet. But if you take a sensible approach to safety and a realistic view of the risks you face, it is possible to bring your premiums down considerably.

Peter Blanc is divisional director for the Eastern Region of Oval Insurance Broking [1]