Question on Insurance docs (direct line)

[slippeddisc]

Hi all,

I have a question re my insurance and thought id try here before speaking to India.

My insurance certificate states the following:

"use by the policyholder in connection with the business of the policyholder"

Does this mean I can use my car for business use?

[Daaave]

I don't think I would trust any reply on here (no offence to anyone intended) or any internet forum in regard to policy wording clarification. The potential impact if you are given wrong advice could be very bad...

However, if it was my policy I would say that yes you are allowed to use the car in relation to your personal business. If you work for someone else I'm not so sure.

[fungus]

The wording sounds as if you are covered for business. But have you told your insurance company the nature of your business? When my wife had a job as a self employed agent for the local free paper, she had to inform her insurers, and business use was added to the policy. I think I would clarify this with your insurers.

[michael769]

Hi all,

I have a question re my insurance and thought id try here before speaking to India.

My insurance certificate states the following:

"use by the policyholder in connection with the business of the policyholder"

Does this mean I can use my car for business use?

It means you can use it for your own business if you are self-employed. Note that if you run an incorporated (limited) company that does not count. You cannot use it for any other business.

[Angus]

There are different classes of "business" use.

We all know the "social, domestic and pleasure" or "commuting" clauses, but if you have either of those restrictions, you may not be insured if you use your car to visit another of your employer's sites or to attend a course or conference.

The two main classes will allow:
1) to visit different sites, attend courses/conferences.
2) as 1 plus represent your employer as a salesman/consultant.

Different insurers will define the exact definitions differently, but broadly speaking, the first assumes occasional use in line with your job and the second assumes that the car is necessary to your job. Most insurers won't charge more for the first.

If you are self-employed and use a car in connection with your job, the insurance company I worked for advised the second

[slippeddisc]

To clarify:

I am not self-employed, I am employed by a company who requires that all their employees' insurances is for 'business use' in order for them to claim 40p/mile if using your own vehicle for work stuff.

From the replies here, it looks like I won't be covered for the above. I'll give them a call in the morning and see re: costs etc.

Another quick Q...

I understand SDP isn't the same as commuting. I assume that if you were technically commuting at the time with SDP insurance you wouldn't be covered, or is commuting to your primary place of work 'included'?

If that isn't the case, how would they know?

Regards.

[Angus]

If you make a claim on a work day between 7 & 9am or 5 & 7 pm I suspect there may be some pointed questions.

In any case, the premium difference between SDP/Commuting/Class 1 business is usually minimal compared to the whole premium. If your insurer demands an additional premium, try asking your employer to pay it.

[GJD]

To clarify:

I am not self-employed, I am employed by a company who requires that all their employees' insurances is for 'business use' in order for them to claim 40p/mile if using your own vehicle for work stuff.

From the replies here, it looks like I won't be covered for the above. I'll give them a call in the morning and see re: costs etc.

I'd be very interested to know what they say. If I've understood you correctly, the sort of business use you're talking about strikes me as by far the most commonplace. Many, many people, in all sorts of jobs must need insurance for travelling they do for their employer: going to meetings and conferences, giving visitors a lift back to the train station or even just popping in to town to stock up on office tea and biscuits. It's never even occurred to me that this wouldn't be the default definition of "business use" as any other definition would surely be much more specialised.

It's insurance renewal time soon. I'll make sure I ask what business use means!

Gavin

[martine]

A question for the insurers...so if it makes 'no' or even 'minimal' difference to the premium, why bother trying to differentiate?

Insurance should be as simple as possible - it's nice to see most home insurers having huge contents cover now rather than getting the policyholder to define in detail what should be covered (as they used to).

And another question: why is car insurance based on the car rather than the driver? Unless the car is very valuable isn't it more relevant to base the premium solely on the driver and their experience and claims history, rather than the performance of the car? I'd like to think I'd be safe in whatever car I drive.

[ScoobyChris]

A question for the insurers...so if it makes 'no' or even 'minimal' difference to the premium, why bother trying to differentiate?

One of the advantages can be that if you don't have business cover, you can use company vehicles for travelling and save wear and tear on your own, which is particularly good if you have to visit unsavoury parts of the country.

I've never been charged extra for business cover but I always figured it was because my business mileage was low (in fact the last time I did any business miles was in 2005 ), but I can imagine if you are on the road a lot, it could impact the premium?

Chris

[michael769]

A question for the insurers...so if it makes 'no' or even 'minimal' difference to the premium, why bother trying to differentiate?

While it may make little or no difference for drivers with a low risk profile, it may (and does) make a significant difference for higher risk drivers. For someone who is a self employed electrician, business is not likely to increase the risk level very much (other than by dint of increased mileage). For someone who is a sales rep (middle aged male sales reps are statistically as likely to wrap their car around a tree as an under 25!), the risk level is likely to be increased significantly.

Insurers ask the question because until you have all the answers you don't know if it matters, and if we just included business use as a matter of course no one would ever bother to tell us if they used it or not. The result is that we would all be paying for the sales reps who run themselves off the road, and for the misdeeds of actors or professional sportsmen (who are in an entirely different world when it comes to risk and premiums).

I understand SDP isn't the same as commuting. I assume that if you were technically commuting at the time with SDP insurance you wouldn't be covered, or is commuting to your primary place of work 'included'?

Commuting is not normally included as part of SDP. You will normally see the wording "including travel to and from a place of employment" or "commuting". Some insurers do offer discounts for SDP only (as you are more likely to have a collision on the way to and from work than you are going to the supermarket).

You do need to be careful though as some insurers did not used to mention commuting in the list of allowed usages so it is not always on the insurance certificate. This is a practice that the ABI is working hard stop, and is also something that the insurance ombudsman takes a very dim view of. I anticipate that we will see legislation in this area after the election as there is a view in the FSA that the industry is not improving the clarity of its documentation and application questions quickly enough.

In the meantime if in doubt it is wise to check with your insurer that they do cover the uses that you put your vehicle to. If they make any statement that does not quite match t he insurance certificate a policy schedules it is in your interests to have their advice put in writing.

And another question: why is car insurance based on the car rather than the driver? Unless the car is very valuable isn't it more relevant to base the premium solely on the driver and their experience and claims history, rather than the performance of the car? I'd like to think I'd be safe in whatever car I drive.

Because the car is a significant factor in establishing risk. Funnily enough someone driving a 1.0l micra is much less likely to be held responsible for a fatality that someone in a 3.5l Audi TT. Also consider that over 75% of what is paid out on claims are for damage/loss to the insured's own vehicle. The repair costs of vehicles varies hugely, and indeed repair costs are the larges single element in determining the insurance group of mainstream cars.

The thing to remember is that insurers do not care about the risk of you having a claim, what is important is how much you will cost them in claims!

[GJD]

Also consider that over 75% of what is paid out on claims are for damage/loss to the insured's own vehicle.

I'm surprised. That would leave less than 25% for everything else: damage to the other party's vehicle (if there was another vehicle involved), damage to third party property, personal injury and probably some other areas I haven't thought of. From all the hype I'd have expected personal injury claims to make up a significant proportion of what car insurers pay out.

Gavin

[waremark]

Also consider that over 75% of what is paid out on claims are for damage/loss to the insured's own vehicle.

I'm surprised. That would leave less than 25% for everything else: damage to the other party's vehicle (if there was another vehicle involved), damage to third party property, personal injury and probably some other areas I haven't thought of. From all the hype I'd have expected personal injury claims to make up a significant proportion of what car insurers pay out.

Gavin

And one might also expect third party fire and theft policies to cost even less. Typically, what is the price difference between 3rd party F & F and comprehensive?

[michael769]

I'm surprised. That would leave less than 25% for everything else: damage to the other party's vehicle (if there was another vehicle involved), damage to third party property, personal injury and probably some other areas I haven't thought of. From all the hype I'd have expected personal injury claims to make up a significant proportion of what car insurers pay out.

Gavin

Well - the 75% includes claims arising from hit and run, uninsured drivers, thefts, vandalism, windscreen, potholes, falling trees, flooding (a rapidly growing component) as well as damage caused by an insured to their own vehicle in a collision. Funnily enough most people (in the average risk category) are 3 times more likely to break their own vehicle by hitting an immobile object than they are to be involved in a collision.

Personal injury claims and fatalities can sometimes be staggering expensive, but in general the UK courts are not very generous when handing out awards, last time a looked (a while ago I admit) losing an limb would net you less than £10,000 in Scotland (My car cost £25,000 from new!). Add to that the fact that such collisions are extremely rare compared to damage only collisions. 3,000 fatalities may seem like, (and is when it comes to human life), a big number but my company (which works for a small subset of insurers) processes about 1,000 claims every week, for comparison I expect to see perhaps 2-3 injury/fatality claims a month ! Virtually all of those claims are not reported to the police or any other authority and simply do not figure in any official statistics (other than as "survey" estimates).

What you are looking at is a tiny number of very expensive claims being set against a vast number of low value claims. The latter add up to a lot more than the former. But that 0.1% of very serious claims still gives rise to almost 17% of that 25% I mentioned above.

And one might also expect third party fire and theft policies to cost even less. Typically, what is the price difference between 3rd party F & F and comprehensive?

The problem is that the two cannot really be compared as a like by like comparison.

In general TPF&T is selected by drivers at the higher end of the risk spectrum (where the risk of an expensive TP payout is greater than for mr average), and this means that the average premium for TPF&T is actually higher than the average for comprehensive.

Lower risk drivers who select TPF&T tend to do so because their car is not worth much. When you have a car that is only worth £250, the risk or an own damage payout is negligible (may payout £250!), so comp tends to be available for almost the same price as TPF&T at that level.

Another factor is that a car insured TPF&T is about 10 times more likely to be stolen, broken into or vandalized than a comp policy. We think this is in part due to such cars being older (and less secure) and more likely to be left in unsafe areas. This does, of course impact the premium - ironically simply selecting TPF&T will increase the risk weighting given to the Theft component of a policy.

Most full comp policies benefit from new business or retention incentive discounts which come from the insurers marketing budget. As TPF&T is unpopular amongst the insurers preferred low risk clients it rarely gets any marketing budget - and this serves reduces the gap between the two premiums.

To answer the original question the average premium for TPF&T is about 97% that or the average price for fully comp. That difference is not statistically significant. That does not mean that some individuals will not find that TPF&T would be substantially cheaper for them.

[Angus]

Also consider that over 75% of what is paid out on claims are for damage/loss to the insured's own vehicle.

I'm surprised too, but I assume Michael's knowledge is more up to date than mine - I'd have thought it was around the 50% mark. (Knock for knock has a lot to answer for)

And one might also expect third party fire and theft policies to cost even less. Typically, what is the price difference between 3rd party F & F and comprehensive?

The answer here is that you're assuming most of your payment is insurance. It's not, it's commission and overheads. Typically I would suggest that at least 40% of the premium covers the insurer's overheads. If you buy through a broker, 10-20% will be their commission.

This applies to most insurance: Legal protection? Those policies cost £2-3. The rest is profit for the seller. Health insurance? A large employer can provide it for a year for what you would pay per month as an individual, because of the quantity and reduced expenses.