An epidemic of personal injury claims will push up the average cost of fleet insurance, with experts warning that the problem will only get worse in the next few years.
No win, no fee-based compensation claims for injuries such as whiplash, often for around £1-2,000 a time, are rising by 10% year-on-year according to analysts, meaning insurance companies have no choice but to raise all premiums to cover the increase in costs.
The whiplash epidemic has reached such proportions that some self-insured fleets have been settling straight away for a fixed fee rather than getting solicitors involved, believing it saves time and money.
Another reason for premium rises is that cars are become more expensive to repair, ironically due to the myriad of safety systems employed to keep occupants safe.
AA Insurance says these costs are rising by about 5% each year.
According to a spokesman for the AA Insurance Premium Index, car insurance increased by 5.9% in 2007.
These figures include private motorists, who are already seeing rises in premiums.
“The insurance industry just can’t continue to find these personal injury claims out of their reserves,” he said.
“At some point they have to pass these costs onto customers.”
The problem is widespread across the insurance industry, although the Association of British Insurers said they had not seen that fleets had yet been hit, while ACFO reported that its members had not seen any specific fleet-based increase in premiums.
The competition in the market has ensured fleet premiums stayed lower than private motorists, but this is a trend set to come to an end, said Andrew Fletcher acting head of commercial motor for Groupama Insurance.
He said: “The combination of inflation and personal injury claims means that fleets can expect to see premiums rise in the next two quarters.”
Insurance companies have also warned that fleet premiums will rise further if increased charges for removing vehicles come into force.
Currently, the charge for removing any vehicle, whatever its size and regardless of how badly damaged it is, is £105.
However, these charges are set to increase significantly in the summer.
“Not all recoveries are insurance claims, but where they are, the scale of these changes may force insurers to increase premiums,” said Phil Gledhill, claims technical manager, Norwich Union.
Not known is how high the rise will be, but fleets can mitigate against them, Gary Donoghue, fleet director of broker LFC Insurance Group said.
“These increases can be off-set with risk management.
"If the risk is running badly, i.e. numerous and/or expensive claims, the underwriters will apply higher insurance premiums.
"But if we can reduce the risk, then the premiums will drop accordingly.”