What’s happening in the Motor Fleet Market

An update from Matt Brunton (Broking Director)

The motor insurance market has continued to harden notably (and vocally!) in the consumer space but of course the impact is equally evident in the motor fleet market.

The changing landscape is attributable to a number of factors. Initially during 2021 and 2022 insurers underwriting profit increased because of the reduced road usage and subsequent accident frequency. Post-pandemic, of course, claims frequency has risen in line with increased usage.

In addition, a number of factors have combined to provide a perfect storm in the marketplace. These include:

• Increases in the value of used vehicles - the ABI reported that the average price of second-hand cars rose by 28% between April 2021 and June 2022.
• Increased use of technology resulting in increased repair/replacement costs and repair times.
• Increased vehicle theft – the ABI recently cited Auto Trader who report that pay-outs for vehicle theft increased by 53% to ￡196 million (up from ￡128million) last year.
• Supply chain issues due to both the pandemic and the war in Ukraine which have contributed with general inflationary issues to increase the costs of repairs - it has been reported that car parts increased by over 13% and paint increased by over 15%.
• The changing compensation environment following the whiplash reforms which have seen personal distress claims becoming more prevalent - Aviva have reported that 41% of work-related ill-health within transportation and storage is attributed to stress, anxiety and depression.
• Long term cost of care for those that have been injured in accidents - care costs have reportedly increased by over 20% in 2023.
• The movement to electric vehicles - which tend to have higher repair costs and are more likely to be written off in the event of an accident.

Darren Lancashire (Senior Commercial Motor Underwriter at AXA) comments that the motor market generically remains extremely challenging with a significant claims inflation trend.

?“This is feeding through into the Fleet Market which continues to harden as a result and the need for corrective pricing post pandemic. With the Discount Rate due to be reviewed in 2024, our expectation is that the current market conditions will prevail well into 2024”.

We have seen a major insurer exit the corporate fleet arena and another pause writing new business. However, it is not all bad news, there is no lack of competition for new business where the claims experience is good and there are positive risk management features in place. Although generally Insurers are looking for rate increases of between 10% and 15% there is scope for well performing fleets.

Lynn Anthony (Underwriting Performance Manager at Aviva) acknowledges the motor insurance market is a dynamic and competitive sector that is influenced by various factors such as changes in regulations, advancements in technology, emerging risks, and consumer behaviour.

“The challenges we have been facing around claims inflation, supply chain shortages, economic pressures and disruption from world events will continue into 2024. The Whiplash Tariff and Judicial College Guidelines are expected to be revised in 2024 also with potentially significant increases to reflect heightened inflation over the last few years”.

Following on from Lynn’s comments, I firmly believe that - as brokers - we now must work closer with our client to provide more detailed submissions to the insurance market. We also need to educate our clients as to the importance of embracing risk management as to create more interest in insuring their business and mitigating the cost of doing so. It also helps to educate them on the importance of driver training and adoption of in-vehicle technology.

This view is supported by Thomas Bennett (Senior Motor Fleet Underwriter at Allianz):

“As an underwriter, it’s hugely important to see a strong culture towards fleet risk management particularly given the backdrop of current market pressures impacting increased claims costs”.

So what can businesses do to mitigate the costs of insurance?

• The earlier a claim (First Notification of Loss) is reported the better to enable Insurers to control third party costs.
• Investment in risk prevention training focusing on improved driver behaviour. A number of insurers offer assistance for this both in-house and with recommended third-party suppliers.
• Careful consideration in respect of agency drivers and the agency used to supply such drivers.
• Dash cams and multi camera systems to help defend claims and reduce claims costs.
• Telematic systems can monitor and improve driver performance which will reduce the chances of an accident occurring.

In a challenging insurance market, it is more important than ever that brokers adopt a proactive approach in partnership with insurers to ensure that clients achieve the best possible outcome. This is a collaborate effort. Go to them with fresh ideas – you never know where the conversation will take you.