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Travel Risk Professionals Whether you’re a car dealer, MOT station owner, garage owner, or a mechanic, you’ve probably noticed that motor trade insurance premiums have been on the rise recently.
Let’s break down eight key reasons behind this increase…
1. The Rising Cost of Car Parts
One major factor driving up premiums is the increase in the cost of car parts. With supply chain disruptions and higher material costs, parts are more expensive than ever. This means repairs cost more, and insurance companies have to cover these higher expenses, leading to increased premiums.
2. Effects of the Ukraine War
The ongoing conflict in Ukraine has had a significant ripple effect on many industries, including the motor trade. The war has disrupted supply chains and increased fuel prices, which, in turn, affects transportation and the cost of goods, including car parts and vehicles. This economic instability pushes insurance companies to adjust their rates to mitigate the higher risks and costs. So while this isn’t just specific to the motor trade industry, it doesn’t help the average trader when it comes to their renewal prices.
3. Inflation
Inflation is another big player here. As the cost of living rises, so does the cost of doing business. Everything from labour to utilities is much more expensive, and these increased operational costs are reflected in insurance premiums. Insurers need to ensure they can cover the higher costs of claims, which leads to higher premiums for everyone in the motor trade industry.
4. Increased Frequency of Claims
There’s been a noticeable uptick in the amount of claims frequency as the number of vehicles on the road return to pre-pandemic levels. More accidents and resultant claims (including an uptick in theft of premium brand vehicles), and more thefts from garages, and more costly repairs all add up. Insurers base their premiums on risk, and higher claim rates within the sector mean higher recognised risks, which in turn translates into higher premiums.
5. Advancements in Vehicle Technology
Modern cars are packed with advanced technology, which, while improving safety and performance, also means repairs are much more complex and costly. Fixing a bumper isn’t just about panel beating anymore – it can involve dealing with sensors, cameras, and other high-tech equipment. These types of repairs drive up insurance costs even further. We’ve also seen an increase in electric vehicles on the road and these are known to be more expensive to repair due to the way they have been built.
6. Law and Rule Change
Changes in legislation can also impact insurance premiums. For example, stricter safety and environmental standards can lead to increased costs for compliance, which insurers may pass on to policyholders in the form of higher premiums.
7. Fraud
It hit the motor trade industry years ago but it is still present and will affect premiums. It makes the sector unattractive to insurers due to the amount of work needed to understand the real from the fake. Cash for crash and ghost broking gave the sector a poor reputation and one that insurers choose to remove themselves from. The Insurance Fraud Bureau reported 13,700 offences of crash for cash in 2023 alone.
8. Value of Claims
All the above have led to claim amounts increasing. Delays & costs in getting parts can make even a minor accident into a costly claim.
So, What Can You Do?
Many of the factors mentioned above are mostly out of the control of a trader – whether working from home or from motor trade premises. However, understanding why motor trade premiums are on the rise can help you make smarter decisions. It can also prepare you for what is around the corner and help you budget for your motor trade insurance when is falls due for renewal. Unfortunately, many motor traders are having to pass the premium hikes onto their customers by reviewing their pricing approach. Here are a few tips to manage these costs:
Improve the security of your premises and vehicles. Insurers may offer discounts for extra security measures. Consider perimeter fencing, alarms that insurers will provide discounts for and bollards to put off any potential threat to your motor trade business. What about adding trackers to expensive pieces of kit so it can be tracked in the event of a theft.
Teach your employees about safe working practices to decrease the risk of accidents and claims. Whether that is from a road risk perspective and driving more carefully on the road or when working in your workshop, making your working environment safer will reduce the risk of a claim. Being able to demonstrate good risk management as a trader will help the conversation with your motor trade insurance broker and, in turn, your insurer.
Keep detailed records of all repairs and transactions to help with claims and demonstrate good management practices.
Many brokers will proclaim to be an expert in the motor trade – but not every broker is the same. Do your research, ask your trader friends who they use and make sure you know which insurers they work with. You will be able to work out from initial conversations and the type of questions they ask about whether they are motor trade specialists or not. They are likely to have wider access to insurance and insure similar businesses. They are most likely to find a solution that suits your needs rather than a generic broker that looks after lots of different types of businesses.
Have you read our 25 Ways to Save on your Motor Trade Insurance article? You may find this of interest and is relevant whether you are looking for a road risks only policy or motor trade combined insurance. There are active steps you can take to reduce your traders insurance premiums.
The increase in motor trade insurance premiums is driven by a combination of factors, from global events like the Ukraine war to technological advancements in vehicles. By understanding these reasons, you can stay informed, stay secure, and keep your business running smoothly!
