Biggest Factors to Affect Fleet Insurance Premiums: 2024 

Why do fleet insurance premiums change so often?

Business owners may look at rising fleet insurance premiums and contrast them to ordinary car insurance policies. Both commercial and non-commercial policies have risen dramatically in the last few years, but fleet insurance premiums can change dramatically because they are set at a micro level in contrast to car insurance premiums (whereby the many pay for the few). 

It isn’t unusual for fleet insurance premiums to increase by 70% in a year following a poor run of claims, and of course once premiums rise, there is always a delay in them dropping back to normal levels. Insurers have to be sure that factors driving the rise in claims have been eradicated and are no longer a threat.

According to one study, the UK commercial motor insurance market grew 19.4% in 2023, partly due to record-breaking price increases. 

Claims history is an important factor when determining fleet insurance premiums, and any changes to your business setup or fleet could require a radical rethink of your internal policies and how you manage risk. 

Individual private car insurance premiums change broadly in line with the overall market, whereas fleet premiums, although they will increase if costs are increasing, are often priced on their own claims performance. 

It is not uncommon with fleet insurance that you have two identical companies operating within the same industry, but Company A has a well managed fleet with a good claims history and is paying £500 per vehicle for their insurance, whereas Company B, who don’t manage their fleet well and have a poor claims history, could be paying £2,000 per vehicle.

Inflation is another problem to account for. The UK is experiencing a claims cost crisis, which is a multifaceted issue. This is why 91% of commercial motor insurance brokers reported increased claims costs in Q3 2023.

Naturally, these rising costs will be passed onto policyholders. Unfortunately, broader economic factors outside of your control mean that even if you have a perfect claims history, you could still experience a rise in your premiums.

What factors influence how high or low the cost of a fleet insurance premium is?

Businesses understand that sometimes their premiums may rise due to factors they cannot control. 

Whenever you apply for a fleet insurance policy, your insurer will thoroughly examine your business, its activities and your claims history.

In the modern business landscape, we can break the issue into three primary factors:

1. Claims History – The volume and severity of any previous claims (usually over a three year period) will be a big determining factor in relation to insurance premiums. If a fleet has a low claims frequency and low claims costs, they will be considered to be less of a risk to the insurer. If this trend is demonstrable over many years, then insurers will have more confidence that this will be a continuing trend and premiums will reflect this. 
2. Risk Management Procedures – How does your company manage risk? Risk mitigation strategies (or lack thereof) will be reflected in your premiums. Examples may include dashcams, driver background checks, vehicle checks, newer vehicles, telematics solutions and driver monitoring. 
3. Your Trade – Which industry do you operate in? Each industry will have average claims figures an insurer can use to help determine premiums. For example, a courier business will be considered a higher risk due to the amount of miles covered and the time critical nature of deliveries.

There is so much that a company can do to influence and manage a risk and the knock on effect of this is that premiums can be influenced and managed too. 

Rising claims costs

The first reason your premiums are rising is the increasing costs of motor insurance claims generally. Higher supply chain costs incurred by insurers will be passed down the line, meaning your premiums will likely rise, regardless of whether you have made a claim or not.

According to the latest figures, UK insurers paid out £2.54 billion in insurance claims in Q3 2023, the most since records began.

Increasing Repair Costs

Repairing vehicles is also costing more than ever. Vehicles have never been more technologically advanced, think newer electric vehicle fleets, making them costlier to repair. Furthermore, garages are paying more for everything from parts and labour to energy costs due to the cost of living crisis. This is why car repairs in 2023 reached record highs. In Q3 2023 alone, repair costs jumped 32% to £1.6 billion.

According to the Association of British Insurers (ABI), from Q2 to Q3 2023, there was:

• a 16% rise in materials,
• a 15% rise in labour costs,
• and a 46% rise in other costs (driven mainly by energy).

Most common reasons for fleet insurance premiums decreasing

Fleet insurance premiums can drop, as they did with some insurers during the COVID-19 pandemic. Naturally, reversing the broader economic situation can see your premiums drop or at least stagnate.

However, fleet managers are encouraged to take targeted actions to reduce risk and lower their premiums. So, what can you do to reduce your premiums?

Improve your claims history

Claims history is your primary factor in determining fleet insurance premiums. A fleet with zero claims over the last three years would expect to pay lower premiums than a similar fleet with plenty of claims.

However, it’s not just about the frequency and severity of claims that matters. You may think a higher number of smaller claims will lower your premiums, but it won’t. Insurers see a high frequency of claims as a prime indicator that a significant claim could be on the way.

Enhance your safety measures

Companies with the lowest fleet insurance premiums demonstrate a commitment to safety, but this isn’t reflected exclusively in their claims statistics.

Insurers will examine businesses’ protocols and safety programs to reduce fleet-related accidents. Some insurers may even offer discounts for businesses implementing specific measures, such as telematics-driving solutions.

Changes to fleet composition

Fleet insurance tends to be more expensive than personal car insurance when there are multiple vehicle types insured under the same policy. Generally speaking, vans attract higher premiums than cars and HGV’s attract higher premiums than vans. HGV’s are at more risk of being involved in a high severity accident because of their size. Insurers will ask for a vehicle schedule when determining their premiums.

All vehicle types will have an inherent risk rating based on nationwide figures. Some examples of metrics an insurer can use to calculate your premium include:

• Model-specific maintenance costs
• Vehicle age
• Value
• Overall safety record

Making changes to your fleet, such as retiring older vehicles or opting for vehicles that are cheaper to repair, can lower your fleet insurance premiums.

Higher driver retention rates

It’s no secret that drivers with fewer points on their licences are perceived as safer drivers by insurers. Also, a low driver turnover could also help to reduce your fleet insurance premiums.

Retaining responsible drivers for longer can improve your risk profile. Likewise, drivers with more experience will also help carve a positive risk profile. Insurers often look at companies with high retention rates as signs of stability and, therefore, lower risk.

Conduct Regular Assessments – Data is your friend, so use it. Conducting regular analysis of your fleet’s accident history and driver behaviour is the first step to finding where you need to prove. Implementing technology to generate this data at a high level and within individual vehicles will give you access to a wealth of actionable insights.

We discuss risk management and the importance of implementing software to minimise this in further detail too, if you need more help.

Enforce Driving Standards – Good drivers result in fewer accidents as the vast majority of accidents are caused by human error, rather than mechanical failure. Fleet risk management enables you to set driving standards and enforce them. This includes background checks to ensure you are hiring responsible drivers and helping your existing drivers to improve.

Review Before You Renew – Working proactively with your insurance broker is also a tried-and-tested method of reducing your premiums. Gather relevant information and provide evidence to demonstrate your commitment to safety and the impact your policies have made.

Reduce Your Fleet Insurance Premiums With FleetCover

Acquire comprehensive coverage at affordable rates with the help of FleetCover. As a fleet insurance broker, we work with the UK’s biggest insurance providers for commercial fleets.

To learn more about getting cost-effective, hassle-free policy proposals, contact FleetCover today.