INSURANCE OF COMMERCIAL MOTOR VEHICLES.
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A Discussion of " Knock-for-Knock " Agreements, and Other Methods of Avoiding Litigation Between Insurance Companies. The Premium Rates
for 1925.
INSURANCE questions, and motor insurance questions in particular, loom very largely at the moment in the minds of the general public. There is a variety of reasons for this the principal being that which has arisen out of the failure of the City Equitable and other insurance companies, in consequence of which a Board of Trade Enquiry Committee is sitting to consider amendments to the Assurance Companies Act, 1909, radical revision of which is probable. One suggestion which has already been 'mit forward is that motor insurance companies should be compelled to fall into line with fire and life insurance companies, and deposit £20,000 as security to policyholders. It is extremely likely that this suggestion will be adopted. After all, it is an anomaly that a fire insurance company, before it can issue a policy for £1,000 on a house, the premium for which. is less than a pound, must put up £20,000 as security, while a motor insurance company can insure Rolls-Royce cars at premiums of £30 each without any other security beyond a promise to pay, in the event of a claim. To this extent, therefore, the law certainly seems to require alteration, tothough it can hardly be claimed that the matter is one of great urgency since, fortunately for the insuring public, the class of company transacting motor insurance is almost invariably of the highest, from 'which a call for a deposit of £20,000 would produce no demur. Several of thcm are in receipt of over half a million pounds annually from motorists as piremiums ; the Motor Union Insurance Company, indeed, claims to receive more than a million pounds per annum, and to be the largest motor insurance company in the world—a claim which is, by the way, challenged by the Genera! Accident Assurance office.
• Suggested State Control.
• Another reason for the interest which is being evinced in motor insurance is the persistent agitation for State insurance of third-party risks—the, heaviest portion of the risk undertaken by the insurance companies.
Various schemes have Fe en put forward, one embodying a suggestion that a composite fee should be imposed, to cover both licence and insurance, the originator going so far as to say that £3 per annum would cover the cost of protection against third-party claims. The suggestion itself may be all right but the estimate of cost must have been made without serious consideration of the claims experience of the various motor insurance companies. Two of the largest offices in this branch of insurance show that in the past five years nearly 60 per ceirt. of the premiums received by them was paid away in claims of this description, and it is actually a fact that only during the past two or three years has any profit been made in this branch.
The experience of 1924 does, as a matter of fact, show a tendency for improvement, but this is mainly owing to the fall in the cost of repairs. On the other hand, the increasing tendency to award very heavy damages in third-party accident claims is likely to operate, in future, to counterbalance that favourable tendency. This experience is general all over the country, and is probably the reflex of the determination of the administrators of the law to• penalize the reckless motorist. Unfortunately, the guilty party is not, as a rule, the one to suffer. If he is insured—as is nearly always the case—the
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penalty has to be borne by the insurance company in the first instance, and in the end by the policyholders of that and all other insurance companies, since motor insurance premiums• are based on claims experience.
Readers may ask, "Why do the companies insure such people ? " or, " Why do they not decline to pay ?" Well, in the first place, the insurance company does not know that its prospective policyholder is likely to behave recklessly, and so long as the answers to the questions in the proposal form filled in by him (or perhaps I ought to say for him) appear in order, he will be insured just as readily as another more careful person. In the second place, litigation is costly, and the insurance company which goes to Court is, in spite of the law, prejudiced beforehand: the interpreters of the law struggle to uphold the policy in favour of the insured as against the company. There is, however, one aspect of the business which we think is deserving of more particular attention, viz., the Knock-for-Knock system, as it is called. Before doingthis, however, we will briefly allude to two recent legal decisions on motor insurance, which illustrate the points we have just raised.
Owner of Car Responsible for Act of Friend Driving,
In this case it was shown that Patrick, the owner of a motorcar, was being clriven by his friend Pratt, the plaintiff's husband being a passenger, and that, through negligent driving, a collision occurred which proved fatal to Pratt. It was held by Mr. histice Acton that, as the defendant Patrick was in tlfe car at the time he had entrusted control to his friend, he was answerable for his act or default.
An Irish "Civil Commotion' Case.
This was an appeal to the House of Lords against a decision of the Court of Appeal in Southern Ireland, on the ground that the seizure of a motorcar on the highway in a disturbeddistrict by armed men did not constitute " loss arising during, or in consequence of, civil commotion" within the meaning of the customary exceptions clause to that effect in all motor insurance policies. The House of Lords reversed the decision of the Irish Court.
One can readily imagine that experiences of this kind are expensive ones to the insurance companies. In the case of the appeal, it is probable that the costs exceeded the amount originally cIaimel, yet, had the company not resisted the claim and persevered until they obtained a verdict in accordance with all precedents of the kind, the clause in motor insurance policies which is intended to protect the policyholders of the company just as much as it is intended to protect the funds, would have been a dead letter.
Knock-for-Knock.
To return to the -Knock-for-Knock system this is purely a domestic arrangement between the companies concerned, and it should not in all fairness affect the insured. Cases where it has done so, however, have occurred, and to these reference will be made below.
My readers will appreciate that if two large insurance companies, say. A " and "B," transact motor insurance, the policy holders in " A " will, during the course of any one year, be 'the unintending causes of a large number of claims against the "B "
company, through accidents caused to cars insured in that company. Since at law a man is liable for damages caused by his torts, it follows that the "B " company would be quite justified in claiming from the persons insured in the " A " company the amount of the damage done by them. The result would be expensive, and frequently unsatisfactory, litigation.. So the "A" and "B" companies agree between themselves somewhat as follows :— In the event of a collision or attempt to avoid collision resulting in damage to vehicles insured by either or both companies, each company shall bear its own loss only in respect of such damage within the limits of its policy, irrespective of legal liability. The absence of a formal claim by the insured under the policy shall not affect the operation of this agreement as between the parties.
agrements are possibly not quite so common, and it is in connection with these agreements, rather than with knock-for-knock arrangements, that friction with policyholders may arise. To illustrate the .practice, let us say that the " A " and " B" companies have entered into a half-and-half, and-not a knock-for-knock agreement. A car belonging to. a .policyholder in the " A " company and a ear belonging to a policyholder in the " B " company collide. The two owners are probably each somewhat in the wrong, but the car insured in " A " company is only slightly damaged and the owner does not claim. The vehicle insured in " B " company, however, is smashed.naore severely, and the 'Owner claims. Let us assume the damage is 240. The " A " and " B " companies each pay half. In the long run, in view of the magnitude of their business, probably neither.office loses by the arrangeMent. What is of importance, however, is that they save the cost of litigation which -would ensure in case of a dispute.
Cases are said to have occurred in which the Knockfor-Knock system has, ila its operation, affected the insured persons. It is certainly difficult for the man in the street who is an insured motorist to realize that, because through a collision between his eir and another, in respect of which he personally did not claim, his insurance company had in fact 13till to make a payment, and that according to their views they are justified in depriving him of his no-cIaim bonus. Legally, no such arrangement can be read into a policy of insurance and if a policyholder insisted the company must give way. On behalf of the insurance companies, however, it should be pointed out that these arrangements are for the benefit of policyholders generally and that they keep down the cost of motor insurance premiums by obviating litigation.
Review of Motor Insurance Rates for 1925.
Rates for commercial vehicles for the year 1825 show very little change. There has been no general revision of " tariff" rates and, of course, no corresponding reduction in " non-tariff " rates. Even Ford commercial vehicles have not so far participated in the reduction given to touring cars of the
same make. However, it is hinted that there is imminent a reduction of approximately 10 per cent., and it is said that certain non-tariff offices are prepared to insure Fords in small country towns for less than 210.
The premium rates for commercial vehicles are given below, but we wish to draw attention here to two recent developments in motor insurance, one of which is of particular interest to hauliers.
Insurance of the Load.
Up to two years ago insurances of loads were difficult to place, as there was but a restricted market. Now, however, there are ample facilities available, and a really good comprehensive policy, covering risk of fire, theft, accidental damage through collision to the load, third-party and law costs, can be obtained at moderate premiums, typical ones being :— Manufacturer ... 25s. per cent.
Miller and corn merchant ... 25s. ,,,,H Haulier These rates apply to non-hazardous goods only. If several vehicles are insured together, a fairly substantial reduction in the premium rates is given. In addition to granting the policy for the sum insured as the average maximum load—let WI say £200— some of the companies undertake to cover any temporary excess over that sum insured by the policy. This is especially convenient for hauliers who occa
• sionally carry expensive loads, since they can take out a policy for their average load, and whenever a more expensive one is to be carried they can secure insurance cover by simply writing or telephoning their insurance company, giving details and arranging to pay the small additional premium charged. The amount of this premium is often fixed beforehand, and may, if requested, be noted on the original policy.
Single Load Insurance.
Insurances covering a single journey can also be obtained. The rates vary with the distance and the nature of the load. We give three specimens:— London to Exeter, one week's cover,
for 2400 worth Of furniture 125. 6d. London. to Northampton, three days' cover on general goods valued at 2250 4s. Od. London to Harwich, three days' cover on furniture valued at 2150 4s. Od.
In the accompanying schedules of rates of premiums for commercial and public service motor vehicles, three classes are specified. Class 1 is for machines used in large cities like London, Glasgow and Liverpool. Class 2 refers to localities having pophlations of from 50,000 to 500,000, and is generally taken to include all the industrial towns of Lancashire and Yorkshire. Class 3 is for the rural areas and small townships. It will be necessary for the individual reader to discover for himself into which category his home town comes.