Motor trade insurance embraces a multitude of risks for a variety of specialists working with vehicles. Ian Ritchie explains
Insurance for the motor trade is a complex and specialist area. The number of insurers offering cover has reduced in recent years and, although there have been some new entrants, the choice of carrier remains limited.
The term `motor trade' covers a multitude of different risks. These include main dealerships, specialist used car sales, body shops, petrol stations, and one-man repair businesses. The term also encompasses exhaust fitters, mobile engineers and tuners, and recovery firms. This list is not exhaustive, and can include other types of business where there is a need for motor trade cover, even when it is not the core business.
The extent of protection sought will be driven by the range of activities of the operation. A main dealership, for instance, will require the full range of covers, whereas a trader without premises, and dealing solely within the trade, is likely to need road risk cover only.
For the business that operates from bona fide motor trade premises, the combined policy is usually the preferred solution. This is, effectively, a business combined policy, with specific provision made for the unique requirements of the motor trade.
The usual business combined sections will be featured: material damage, business interruption, cash and employer's liability will all be present. The public liability section will be trade specific and, as well as offering standard cover, will provide cover in respect of defective servicing and defects in goods, including vehicles sold.
It is also usual for an engineering section to be provided. This will deal with statutory inspection of lifting platforms and pressure vessels, such as air receivers.
Within the material damage section, special attention will be paid to tools. It is usual for the policy to provide cover in respect of employees' tools, as it is difficult for the fitter to buy the cover in isolation. From an employer's viewpoint, it is preferable for the company to arrange the cover, thus ensuring adequacy of the sum insured, as in the event of theft, it is one way of reducing downtime to an absolute minimum.
It is usual for the material damage section to provide cover for vehicles while on the insured's premises. It is important to remember that the road risk section will not provide cover on vehicles until they are driven off the insured's premises.
If there is a substantial exposure to vehicles in the open, close attention will be paid at survey to the security arrangements, both in terms of theft, and malicious damage. CCTV, wheel clamps, collapsible posts and vehicle immobilisers are all tools at the disposal of the underwriter wishing to limit his risk. The responsible broker and prudent proprietor should be able to work together with the underwriter to ensure an acceptable level of protection.
If the business involves fuel sales, there will be substantial cash handling, and the need for an under-floor safe. Attention will have to be paid to cash handling arrangements with consideration given to collections made by a security company, or employees accompanying cash deposits to the bank.
If the premises is a 24-hour filling station, particular attention must be paid to overnight security, when it is likely that reduced staff numbers will apply.
Road risks can form an integral part of the motor trade combined policy, or in appropriate cases, can be purchased as a stand-alone policy. It is also possible to buy a combined road risk and public liability policy from certain insurers.
This section needs close attention, and is often contentious and misunderstood both by the trade and by many in the insurance business. Many in the motor trade believe that having purchased motor trade road risk cover, they then have carte blanche for anyone to drive any vehicle, for any purpose.
It is therefore vital that front line staff in the broker or company have a clear grasp of the extent of cover, as well as any special arrangements that may exist for the particular client.
The policy will provide cover for vehicles owned by the policyholder. This means that if the policy is in a company name, a vehicle owned by a director is not covered. Many in the motor trade fail to appreciate this distinction, which often does not come to light until a claim is made.
In addition to vehicles owned by the company, vehicles in the insured's custody for motor trade purposes are also covered. This will allow collection, delivery and road testing. Often, the business will utilise trade plates to drive vehicles that are not taxed for road use.
The extent of eligible drivers will vary according to the requirements of the business and the underwriting attitude of the insurer.
Cover can be on a named driver basis, or, in a larger risk, may cover employees on an unnamed basis. In addition, indemnity can be provided for demonstration, but it is usual for this cover to be subject to the proviso that the customer is accompanied by an employee.
Most large dealerships and body shops now provide courtesy cars, and this effectively produces a fleet or mini-fleet risk, within the road risk section.
With all the variable factors outlined above, it is essential that the management recognises its potential exposure and works with the broker and insurer to keep as tight a control of risk as possible to avoid claims cost spiralling away, with the inevitable premium hike following close behind.
While motor trade insurance is specialised, by understanding the various component parts that make up the available covers, the handling within the underwriter or broker's office can be managed professionally.
Cover for employees' tools under a motor trade combined policy is often taken because:
a .It is cheaper
b Downtime is kept to a minimum in the event of a loss
c The cover is wider
d Because they are most likely to be stolen.
A motor trade road risk policy will normally cover:
a Vehicles in the showroom
b Vehicles personally owned by the directors of the company
c Customers' vehicles while on road test
d Vehicles belonging to employees.
A road risk policy can be:
a Part of a motor combined policy
b A stand-alone policy
c Combined with a public liability policy
d All of the above.
This week's CPD page was written by Ian Ritchie ACI, a risk management consultant. He can be contacted on 023 8063 6201 or by email on email@example.com.
The CPD page is edited by RW Associates, specialists in training, competence and compliance. Email at firstname.lastname@example.org
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