Grey Fleet and Occasional Business Use
The gap in cover exists when an employee uses their own vehicle for business use but they don’t have the correct cover in place on their own policy. In this scenario, if the employee was using their vehicle for business use and had an accident, their own policy wouldn’t pay out and the third party would claim against the company fleet policy.
What is a grey fleet?
A grey fleet is a vehicle owned and driven by employees for business purposes. The employees are usually reimbursed on a pence per mile basis for using their private vehicle on business journeys.
Any vehicles which are used by employees under cash allowance schemes are also considered a grey fleet.
Can employees use their own vehicles for business use?
Yes, employees can use their own vehicle for business use. There are estimated to be over 14 million cars on the road that are privately owned by employees and are used for business use.
These are the vehicles that are not owned or insured by a company, they are owned and insured by an individual employee of a company but are used for business use.
As these vehicles are not company owned, it is much harder to control this element of your fleet, however, it is no less important.
What is a grey fleet driver?
A grey fleet driver is an employee who uses their own personal car for business purposes. Any journey made for business purposes which requires the use of a personal vehicle, means the employee will be classed as a grey fleet driver.
What is occasional business use insurance?
Occasional business use insurance is when an employee is required to use their personal vehicle to drive themselves places for business matters, but not on a regular basis like a grey fleet policy.
Employers hold a duty of care, and must ensure that their employee is fully insured before driving for work. If there was an accident whilst an employee was using their vehicle for work, and they didn’t have the correct insurance in place, then the employer could be held liable.
What is classed as business use on car insurance?
Business class insurance is like regular car insurance but it also covers drivers when their personal car is used for commuting to and from work, as well as social and personal matters.
Do you need business insurance to commute to work?
No, you don’t need business insurance if you solely use your personal vehicle to drive to and from work. Your regular commute will usually be covered by standard insurance policies, but you should check anyway if you’re unsure.
Your policy would need to include commuting to be covered for your daily commute.
You are likely to need business insurance if your job involves extensive driving on top of your usual daily commute. This could include visiting clients, delivering goods, visiting sites or even transporting tools and equipment.
How do you manage a grey fleet?
There are a few techniques you can use to track and manage your grey fleet, these include:
- Measuring your grey fleet use. You should establish who uses their vehicles for business use and how many miles your employees drive per day and gather and record this data.
- Creating a hierarchy. Once you have identified who uses their vehicles for business use, you must develop a system for checking they are adequately insured. This would include driver checks.
- Driver checks. Each driver needs to be held with the same responsibility as those who drive company cars. This means they should have up to date insurance, tax and a valid driving licence and any convictions must be declared on their personal insurance.
Any information about accidents should be stored alongside the information of the vehicle they drive.
- Enforcement. All grey fleet vehicles and drivers must be stored on some form of management system, which allows employers to easily view whose documents are out of date, or about to expire.
Grey fleet management compliance
There are a few regulations of grey fleet management which managers should be aware of.
- Employees’ cars must be established inside of the insurance and servicing policies to ensure their vehicle is definitely covered for company travel.
- Managers must keep track of the status of a grey fleet vehicle to ensure it meets legal and road requirements, including a valid driving licence, insurance details including business uses, MOT certification and Road Tax validity.
- The vehicle must meet the sustainability standards for work purposes. That includes the age and condition, whether it is equipped with ABS, ESP, air conditioning and so on.
What should you be doing to mitigate insurance risks?
As a minimum, you need to check your driver’s licences and make sure they have got the correct insurance in place.
If your employees are using their own vehicles for business use, then they would need a minimum of ‘Class 1’ use covered on their motor insurance policy.
Moreover, you should be checking that your employees’ vehicles have valid MOT’s, especially as most ‘Grey Fleet’ vehicles tend to be much older than company cars which are traditionally leased for a period of say, 2 or 3 years, and then exchanged for new vehicles.
If you have occasional business use included on your current fleet insurance, this will cover you for any business trips your employees make in their own vehicles.
However, as per your normal fleet insurance criteria, you will need to make sure that these employees are complying with your current policy with regards to their motoring convictions.
Otherwise, you risk exposing yourself to a gap in your insurance cover. Most insurers will expect you to document that you have made these checks with regards to your ‘Occasional Business Use’ extension.