Businesses and individuals involved in the motor trade require special, flexible motor insurance arrangements.
- A dealer could be involved with buying and selling vehicles
- A repairer could have customers’ vehicles on the premises for road testing
- A motor trader may be driving otherwise uninsured vehicles
- A motor trader may be using a Trade Plate to move unlicensed vehicles.
A motor trader needs a wide cover with flexibility on drivers, vehicles and use.
Where the motor trader has premises, a wide range of non-motor covers is also required.
Usually the motor traders’ insurance needs are catered for by brokers who arrange combined policies or road risks only policies, depending in their clients’ business requirements.
A number of insurers are prepared to issue road risks policies only and these are usually used by small businesses, for example the operator trading from home.
What is a motor trader?
Businesses calling themselves motor traders range from sole traders often operating from home to national main dealer organisations.
Apart from sales and repair, other businesses requiring motor trade type cover include:
- Vehicle and accessory manufacturers
- Body repairs, tyre and exhaust fitters, windscreen replacement firms and valeters
- Security device installers, vehicle electricians, tow bar fitters
- Body and coachbuilders
- MOT testing stations.
Basically, any business that needs the facility to use a range of vehicles, not necessarily belonging to them, could be eligible for a motor trade type insurance.
Motor insurance needs of motor traders
Where a motor trader uses a vehicle in RTA circumstances, the use must be covered by a motor insurance policy. In this respect, a motor trader is no different from any other motorist.
The law requires unlimited bodily injury cover and £1m third party property damage cover (RTA 1988 S. 145). The £1m is regarded as low and it is advisable to arrange limits of at least £2m or £5m.
Where the motor trader has premises, accidents occurring on or about the premises could be regarded as RTA accidents and it is important that any policy issued recognises this (See May v DPP 2005).
For this reason, it is advisable to place the motor trader’s public liability cover and road risks cover with the same insurer.
Types of vehicles included
The insured vehicle is generally described as ‘any motor vehicle the property of the insured or in their custody or control in connection with the business’. In other words, the policy would not cover a vehicle borrowed by the insured for a holiday.
In addition, the cover will include any vehicle, mechanically propelled or otherwise, whilst attached to an insured vehicle. This would include disabled vehicles, trailers or caravans.
Steam driven vehicles
Generally there is an exclusion of steam driven vehicles. They are seldom found now and are usually kept by groups of enthusiasts. Before cover is provided on a steam driven vehicle, the boiler has to be subject to an inspection contract.
Road risks insurance covers vehicles described in the policy whilst on the road, or whilst temporarily garaged in the course of a journey but not on any premises owned or occupied by the insured.
However, a number of road risks insurers will cover vehicles at the homes of the insured or named drivers.
Standard covers available are:
- Third party fire and theft
- Third party only.
Normally comprehensive cover is subject to a substantial excess and, where a number of insured vehicles are damaged in the one incident, the excess applies to each vehicle individually.
A no claim discount is usually allowable on a scale similar to commercial vehicle policies and larger policies may be fleet rated.
The following rating methods are used:
- Named drivers
- Trade plate
- Points rating.
Insurers will also take into account all the standard motor insurance rating factors, for example;
- Claims experience
- Drivers’ records, ages and experience, especially with the type of vehicles involved
- Type of business and vehicles.
Named Driver basis
This basis is normally used for risks with up to say four or six drivers. Only drivers named in the policy are covered. In most cases, the policy will permit private use by the named drivers if requested.
Where wider driving and use is required, normally a points basis policy would be issued.
Trade Plate basis
Only vehicles carrying one of a number of specified trade plates are insured.
Trade plates can only be used in connection with the motor trade and cannot be used for social, domestic and pleasure purposes. For this reason, there are not many policies issued on this basis.
This is used for medium to large motor traders. It is more flexible than named drivers with more extensions available.
Normally, all employees are permitted to drive for business purposes.
Points are usually calculated as follows:
- Drivers -10 points per driver
- Vehicles owned or held for sale and licensed for road use –10 points per vehicle
- Trade plates - 20 points per trade plate
- Goods carrying vehicle used for hire and reward -25 points per vehicle
- Private hire cars or self-drive hire cars - 25 points for first car and 50 points for any additional cars
- Motor cycles - 5 points per machine
- Other vehicles - 5 points per vehicle.
Premiums are based on units of 100 points.
The premium is adjusted in the same way as named drivers depending on other features of the risk such as claims experience, ages of drivers etc.
Points and premiums are recalculated each year, using up to date figures produced by the motor trader. The information provided gives the insurers an opportunity to review the risk prior to renewal.
Private use (SDP)
This may take a number of forms:
- Named drivers
- the named drivers
- wives/husbands of named drivers
- Points basis
- principals, directors and their husbands/wives
- named employees
- unnamed employees
Use and driving
It is important to understand these terms in relation to motor insurance generally, and to motor trade insurance in particular.
Consider the following example:
The policyholder’s wife may be named or described in the certificate as having SDP use, but, unless she is also named or described in the certificate as being permitted to drive for SDP, she cannot drive under the policy.
If she wishes to go shopping, only a driver (say, an employee) who is described in the certificate as being permitted to drive for SDP purposes can take her to the shops. In this context, she is using the car and the driver is driving.
In this example, if it was the employee’s wife who wanted to use the car for SDP and she was not named in the certificate as having SDP use, her husband would not be able to drive her for SDP use.
There have been misunderstandings where a person named as an SDP user in the policy but not named or described as an SDP driver has driven the vehicle thinking that they were insured to do so.
Loan or hire of vehicles
This extension is usually only available on points basis policies and includes:
- Customers (Courtesy cars) - Hires or loans may be to customers whose vehicles are being repaired by the motor trader. As an alternative, the policy may provide contingent third party cover for the motor trader where the customer has agreed to insure the courtesy car on his own policy
- Relatives or friends - Cover can also be extended to cover loan or hire of vehicles to relatives or friends of the motor trader.
Tuition and demonstration
This is to enable prospective buyers to test drive vehicles and there is usually a requirement that the customer is accompanied by a member of staff.
In some cases, usually where prestige cars are involved, the dealer will ask for an extension where the customer can have the car for a few days. This ‘unaccompanied’ demonstration has to be very carefully underwritten.
Use for another business
For example, the policyholder may own a retail shop and this cover would enable him to use motor trade vehicles to visit the cash and carry warehouse.
Private hire or self drive hire
If the insurers are prepared to provide these extensions, it is usually only if there is only a small, incidental exposure. Larger operations should be insured separately.
Contingent third party cover
This covers the trader where employees may use their own vehicles on the firm’s business. Normally all classes of use on private car policies exclude use in connection with the motor trade.
Contingent third party cover would also apply where vehicles are hired or loaned to customers who have agreed to insure the vehicles themselves.
COMBINED POLICIES FOR MOTOR TRADERS
Most motor trade businesses need more than just road risks cover.
Insurers issue combined policies to cover the non-motor risks and normally the road risks cover is included in a separate section. Many of these covers are similar to those required by light engineering businesses.
Typical covers are:
- Property damage, usually on an ‘all risks’ basis. The property would be segmented as follows:
- Machinery, fixtures and fittings
- Stock, including parts and accessories
- Own and customers’ vehicles and the contents of customers’ vehicles. There is usually an excess applying to accidental damage to vehicles and this is usually applied to each vehicle, even where several vehicles are damaged in the one incident. However this can vary in the market with some insurers only applying one excess
- Employers’ liability
- Public liability including work away from the premises
- Products liability-vehicles, spares, accessories
- Business interruption which protects the business against loss of income when recovering from loss or damage to the premises
- Engineering, including inspection required by H&S regulations.
- In order to underwrite these risks, insurers require an extensive proposal form and normally survey the premises.
Common extensions to combined policies for motor traders
If a vehicle is returned to the customer after repair and a fault in that repair causes an accident, this cover protects the trader.
Liability for signs and boards away from the premises
Unless specially mentioned, the standard public liability policy may not cover liability arising from signs and boards away from the premises.
This protects a motor trader in cases where a vehicle taken in part exchange is subsequently found to be stolen or otherwise have a defective title. Usually cover is conditional upon the trader running an HPI check on these vehicles.
Why should I get it from you?
Good Service – Local Business – Reasonable Prices
Any business that needs the facility to use a range of vehicles that don’t necessarily belonging to them could be considered part of the motor trade. If your business buys, sells, manufactures or repairs vehicles or their accessories, you could benefit from Motor Trade Insurance.