Scott Mills Discusses the Future of Fleet Insurance

23 October 2020

2020 seemed destined to be a year of change for the fleet industry. Between the rise of electric vehicles (EV) and the death of diesels it was going to be a transformative year for the motor industry from manufacturers to fleet insurance brokers. No one though could have predicted quite how much it was going to change thanks to COVID-19 and seismic changes it has brought to the way we live, work and travel.

To get an assessment of how the turbulence of 2020 has affected the fleet insurance market and what the long-term impact may be for the fleet insurance sector, we caught up with Policyfast’s Head of Fleet Underwriting, Scott Mills, who sees change and opportunity in equal measure.

1.With a second lockdown potentially on the horizon for the UK, how do you see this affecting the motor fleet market?

With the recent government announcements regarding new social distancing guidelines, I think it is inevitable more pressure will be brought to bear on certain sectors of the UK. There will be some that reduce vehicles numbers or cease trading. However, there will be some positives; we have for example seen an upturn in enquiries for distribution fleets for both haulage and courier. A recent article in Fleet news suggests both of these sectors saw an increase of vehicle usage of around 20% in the past month, so there’s certainly room for optimism.

2.Where has the growth in the fleet insurance market been coming from recently and which sectors do you think will continue to grow?

It does seem that individual couriers are on the rise, however I haven’t noticed any other areas grow significantly. I anticipate the seasonal growth of courier and haulage fleets from October will be greater than previous years and I’ve observed from various sources an increase in home deliveries, from clothing to groceries which is very positive to hear. I know our doorbell seems to be ringing more often than usual!

3. 2021 is shaping up to be a big year for the UK with the uncertainty around Brexit due to come to an end. One of the industries that could be seriously affected by this is the haulage industry. Has Policyfast seen any changes in demand for truck and truck fleet insurance recently?

With the negotiations still ongoing it is too early to predict the impact. I believe it is sensible to not jump to conclusions until the full details of the new arrangement is announced, in which case we can then begin to plan and adapt for change. We have seen a significant increase in enquiries, (just over 40%) on 2019 for the year to end of September coming in to our Specialist Fleet Team, who focus primarily upon Coach, Self-Drive Hire, Courier & Haulage fleets. Coach in particular seems to be a hot sector.

4. There was talk of a hardening market in early 2020, has this materialised?

It was a very testing renewal season for insurers RI programs. I was reliably informed that many motor insurers were facing significant increases to their premiums to cover the increased cost of RI. It would appear that Covid-19 has impacted the planned increases in a number of ways:

  • Loss ratios for the last 6 months are better than anticipated due to reduced traffic and pedestrians, however these are false positives and not a reflection of the clients’ true claims performance. If vehicle and pedestrian traffic continues to return to normal, it is logical to assume that loss ratios and claims frequency will return to pre-covid levels.
  • Insurers are having to plug a gap in GWP created by the significant return premiums given to clients laying up vehicles. Insurers are understandably trying to retain as many fleets as possible and we have seen some significant reductions in the face of competition.

Now that vehicle usage has returned to some form of normality, I expect increases will become more common.

5. And finally, where will the fleet industry be in five years’ time?

Consolidation of the broking market will undoubtedly continue. This often creates opportunities for the medium to smaller independent brokers and new players that come to the market.

There are also great opportunities for those wanting to write the “middle-performing” Haulage and Courier businesses. At present there is limited market appetite for fleets that are in between the two ends of the spectrum. We all know there are plenty of markets that like well-run, low claims cost fleets and that there are also markets that like to write the more claims adverse fleets. So, there really is a window of opportunity for an insurer, for consistent performing fleets that do not fit either profile. We have a couple of insurers wanting to enter this arena for the right risk.

From what I witnessed in September, there are a number looking to write those middle performing Car and Van fleets, there are always examples: the most dramatic was an insurer quoting £17k on a case that paid £50k the year before, the market rate was £35k. I am not sure if this is part of the traditional year end blue cross sale, or a long-term strategy.

Thank you, Scott, most informative. If you’d like a competitive fleet; Coach, Courier or Truck insurance quote for your clients, then visit Policyfast today.

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