Accepting the risks
Page 42
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The non-standard insurance market was devised to help provide insurance for risks that ordinary underwriters would not wish to be involved with. John C. Vann looks at its development and how it could help you overcome any difficulties you might be having in arranging your motor insurance
THE orthodox motor insurance company underwriters are not willing to take on every proposal put to them. Some proposals contain features of risk which make underwriters shudder. The driver concerned may, for instance, have just emerged from a driving ban following a drunkin-charge conviction.
But in the UK in 1969 — somewhat surprisingly — there appeared an insurance market for so-called non-standard motor insurance risks. Car and motor cycle insurance cover was offered by a company called Cloverleaf to "persons who have difficulty in obtaining adequate protection through normal insurance channels." In other words, Cloverleaf set its stall to specialise in the non-standard risk market.
The staid, orthodox motor underwriters were predictably dubious, expressing grave doubts as to the feasibility of such an operation as "non-standard". They almost laughed up their sleeves! It seemed to go against all the accepted underwriting principles.
New ideas, of course, are sometimes difficult to take in. Yet the thinking behind the "nonstandard" approach was — and still is — eminently sensible: there is a premium for every acceptable insurance risk. That is, if a particular risk shows detrimental features, then apply appropriate terms to make the risk acceptable. One way would be to charge a high premium and/or impose an excess; that is, require the proposer to bear the first, say, £100 of any damage claim.
Even though the terms might appear rather steep, the insurance cover would be available for the vast majority of proposers with the wrong type of record who might not be acceptable in the ordinary standard market. Cloverleaf stood to make such business pay its way, provided the premiums were sufficient. And that is how nonstandard motor insurance started in this country, though it had operated successfully in the United States since 1953. The first company was Dairyland of Madison, a specialised motor insurance company in the same group as Cloverleaf.
For reasons best know) tO itself, Cloverleaf did not include commercial vehicle insurance in this "non-standard" exercise. They still do not. However, the Excess Insurance Company, which entered the "non-standard" area nearly a decade ago, has brought in commercial vehicles, so we can take a look at what is involved.
For the Excess and non-standard commercial vehicle insurance, no fleet rating is available; all vehicles must be rated individually. The premium is built up by applying the basic standard premium rate to a risk. This rate is then topped up with surcharges for adverse features and thus the non-standard premium is arrived at.
For convictions (including aiding and abetting), only those within the previous five years count as adverse features, apart from parking offences or the first speeding offence, which are discounted. For accidents, a surcharge only applies for each blameworthy or partially-blameworthy accident within the previous three years.
With the Excess, six major convictions are listed: driving under the influence of alcohol or drugs; any conviction causing disqualification (including "totting-up"), dangerous or reddess driving, driving while disqualified, manslaughter or causing death, and failing to stop fol
lowing an accident. A surcharge of £100 is imposed for each of these major convictions (in the previous five years) where the cover is comprehensive. This surcharge drops to £60 if a third party fire and theft or third party only policy is required.
Certain convictions render a risk unacceptable with the Excess; for example, convictions for stealing or taking away a vehicle without the owner's consent.
One minor conviction or one accident will not affect normal terms. For one minor conviction plus one accident, or two minor convictions, or two accidents, normal terms will apply if two years have passed since the last occurrence, or if two years, no claim discount is being earned and being claimed with the proposal. All other combinations of minor convictions and accidents will attract a surcharge.
Some specific risks in the nonstandard category are not taken on by the Excess, such as any "special" types of commercial vehicles, including tippers and agricultural or forestry vehicles. Also in the "non-acceptable" class are vehicles 20 years old or over and those valued at £10,000 or more. Additionally, vehicles valued at £3,000 or over are not quoted for if the cover required is third party fire and theft only.
A point to watch is the policy "excess" position, that is, the sum which the policyholder has to bear out of his own pocket in respect of accidental damage to his vehicle. For non-standard risks a basic compulsory "damage" excess of £50 applies. But, in addition, various other compulsory excesses are imposed where applicable, such as in the case of young and/or inexperienced drivers. In this context "inexperienced" relates to a learner or a driver with less than 12 months' fully qualified experience. For inexperienced drivers aged 25 and over, the excess is £35. this means that the total excess is £85.
Then we come to young drivers. In the eyes of the Excess Insurance, "young" drivers are those in the age range of 17 to 24 inclusive. All drivers in the range 17 to 20 years (whether inexperienced or otherwise) have an excess of £75 applied, while those in the 21 to 24 range carry an excess of £50. Thus the total excesses respectively are £125 and £100.
These are minimum standard excesses. If there should be any undue circumstances surrounding any specific driver, then a higher excess could well be applied at the company's discretion.
Drivers aged 25 or over, if driving under an international licence, have a £50 excess imposed — plus the basic £50, a total of £100.
So if you experience any difficulty in obtaining insurance cover for a commercial vehicle (or almost any other vehicle), whether you are an individual or a firm, and whether you own one commercial or several, you are at liberty to try an insurance company offering non-standard cover. Even if any terms and premiums quoted to you in the standard market appear harsh and/or sky-high or generally unsatisfactory, once again there is no harm in approaching the nonstandard market. An insurance broker or consultant will be glad to guide you in this sphere.
If you ever wish to apply to the Excess Insurance Group, the address is The Warren, Worthing, West Sussex BN14 9QD (tel: 0903 39933). These insurers deal in standard as well as non-standard business.