Why Insurance Premium pressure will intensify
Rising injury claims and repair costs are driving up the price of vehicle insurance, but on the other hand new technology could reduce accident frequency dramatically and so benefit your risk management.
After a 2016 year of double digit fleet insurance premium increases in many European markets, corporate face more of the same in 2017 unless they can address their risk profiles and claims costs. Amid this challenging environment, however, new solutions are becoming increasingly widespread for employers prepared to grasp the nettle of their company car choice lists.
In markets like the Netherlands, Spain and Poland, premiums have risen by anywhere from 30% to 200% in the past few months. Similar increases at renewal are likely in other countries, too, as insurers face sharp increases in the costs of both personal injury claims and vehicle repairs.
Facing a perfect storm, insurers face tougher solvency regulations and can no longer make up premium shortfalls through their financial results, with interest rates at zero. In these circumstances, narrow margin fleet business no longer looks attractive.
The fleet business has always been a cyclical market, with insurers driving down premiums as they buy market share, and then exiting the sector when margins become too thin, but this time conditions are slightly different. With greater efficiency through IT, everything is known faster and more accurately. “I expect this situation will be stable for the future, and I do not expect a downward movement in premiums,” Eric Scrayen, executive director of VHS, says.
To offset this premium inflation, he advises fleets to take more risk themselves, accepting a significantly higher excess and implementing focused risk management initiatives.
Accepting more risk in-house, in lieu of insuring it, saves on insurance premium tax, which is as high as 25% in Belgium, 33% in France and 42.9% in Denmark. At the same time, low cost smartphone apps and more sophisticated telematics systems can give fleet managers an immediate and honest insight into how their drivers behave on the road. The long term consequence could be the development of insurance policies based not on how far you drive, but how you drive.
Arguably the most exciting risk reduction measures, however, lie with technology that can deliver much greater safety on the road. Autonomous emergency braking (AEB) systems, lane departure warnings and self-parking cars have the potential to transform fleet accident records with virtually no intervention of the fleet department beyond reviewing the company car choice list.
Eric Scrayen advocates choice lists that heavily favour cars fitted with advanced driver assist systems (ADAS), particularly when these are part of the standard specification rather than extra cost options.
At Zurich Risk Engineering Europe, practice leader Andy Price mentions that insurers were already starting to witness the benefits of advanced safety systems, in terms of both lower accident frequency and lower claims settlement costs.
“2017 will see further development of ADAS so they are effective at higher speeds,” says Andy Price. “The systems will get better and better and we will see more of this equipment fitted as standard.”
His fear is that the technology will lull drivers into a false sense of security, increasing their risk taking as they become over-reliant on the systems. The danger is not simply from excessive speed and aggressive manoeuvres, but from being distracted by smartphones and in-vehicle infotainment devices. As a result, some companies are interested in technology that can block smartphone apps while a vehicle is moving. | 01/02/2017 | Jonathan Manning