Insurance for Self-Drive Hire Operators

Operating a self-drive hire company comes with all sorts of risks. Balancing these risks and your profits can be tricky—you must properly appraise drivers and manage your vehicles all while promoting profitability.

Things get even trickier when operators have to insure a whole fleet of vehicles rather than just a few. More cars for hire means more risk exposure, and reducing this exposure is vital for the success of any self-drive hire company. A poor claims history can increase your premiums and operating costs. The following provides an overview of self-drive hire insurance and several ways to manage the risks associated with offering self-drive vehicles for hire.

At Business Insurance Service, we understand not just the insurance industry, but the commercial sector too. Our brokers have years of experience and expertise in finding professionals from across all disciplines the right kind of Liability and Professional Indemnity insurance cover for professionals, giving both sole traders, SMEs, and large practices the protection they need.


What Insurance do Self-Drive Hire Operators need?

Motor vehicle hire operations may offer both short-term and long-term hire and leasing of not only motor vehicles, but also motor homes and caravans. Many hire companies have their own vehicle repair on premises, while others will contract out. Services that may be offered are the delivery of vehicle to customer or the pickup and transport of customer to the hire facilities. Some hire agencies also have a used vehicle exposure to sell off the vehicles that have reached a set mileage or usage. Some operations have facilities to provide drivers and limousine services.

Additional services that may be offered are the haul-your-own vehicles and other devices for customers to transport their own items. All of these add to the overall exposures involved.

Property exposure normally consists of an office and garage. The garage presents the standard hazards of gas and oil. There may be spray painting (although that is usually contracted out), which must be done in an approved booth and away from any heat producing activity. Housekeeping is vital; all greasy rags must be picked up and stored in a covered metal container.

Crime exposure comes from Employee Dishonesty and money and securities. All ordering and inventory must be kept as separate functions, as must the depositing and the disbursing of funds. A set procedure should be in place for the regular deposit of cash.

Premises liability comes from the customer pickup in the office and in the parking areas. The parking areas must be well maintained and lit. In addition, there may be services that transport customers to the facility. Employees who interact with customers off site must be screened.

Product liability exposures are high if there is a used vehicle sales operation.

Motor liability comes from the use of the vehicle by a customer. Drivers must have a valid licence and proof of insurance.

Motor Trade exposure exists when customers leave their cars while renting other vehicles. The leasing operations should protect the vehicles in the same way they do their own. A key protection must be prevention of handing the car to the wrong owner.

Employers’ liability exposure in the office is minimal. The garage operations can have lifting injuries, cuts and vehicle falls. Eye and ear protection should be provided and hoists procedures in place.

What is Covered?

Self-drive hire cover is divided into three main types:

  1. Third party only (TPO) covers damages to other peoples’ vehicles or property and any injuries they sustain in an accident with your vehicle.
  2. Third party fire and theft (TPFT) covers damage to or loss of your vehicle caused by fire or theft in addition to the cover provided by TPO.
  3. Comprehensive (COMP) covers TPO, TPFT and most other types of damage, including vandalism.

COMP cover is the most common, accounting for about 85 per cent of the UK motor insurance market. However, it still has some general exclusions that may apply to damages or loss caused by the following:

  • Use of a vehicle by a driver not covered under the policy
  • Radioactive contamination
  • War risks
  • Riots and civil commotions
  • Earthquakes

Self-drive hire cover is typically separated into two payment structures: pay-as-you-go or an annual policy with monthly premiums. The appropriate cover will depend on an operator’s business—if a business operates year-round with very little variance, an annual policy will be more cost-effective. If a business operates primarily in only one season, a pay-as-you-go policy will provide adequate cover and charge a lower premium during months with slower business operations.

Who is Covered?

The length of the hire contract will dictate whether the vehicle is insured under the hirer’s or operator’s insurance policy. Normally, long-term contracts require hirers to insure the vehicle under their existing policy, and short-term contracts require only the operator’s insurance.

For short-term contracts, each hirer must produce a driving licence for inspection and complete a short proposal form to be covered under the operator’s insurance. Companies will typically request:

  • Ages of drivers
  • Occupations of drivers
  • Licence details, driving experience and motoring accident/conviction history

This information will be used to calculate risk and indemnify the operator in the event of a hirer deliberately falsifying information. If the operator can prove staff followed the correct procedures to acquire information from a potential hirer, the business will not be held liable. Therefore, operators should stress the importance of consistent and thorough techniques when interviewing potential hirers.

Long-term hirers who must secure their own insurance cover will have to complete a form with information underwriters use to calculate risk. These forms ask for:

  • Identity—Name, trading name, address and contact details
  • Personal details—Date of birth, licence details, hire car driving experience and employment status
  • Vehicle use—Estimated annual kilometres travelled, operating radius, licensing details and copies of documentation
  • Vehicle details—Number of seats and passengers the vehicle is licensed to carry, any accessories (such as two-way radios), overnight parking information and any no-claims discounts

Whether hirers are securing their own cover or falling under the operator’s, age is a deciding factor in determining self-drive hirer risk. Most self-drive hire companies will rarely hire cars to drivers under the age of 21 because younger drivers have a disproportionately higher number of accidents compared to older drivers. Insurers also typically require drivers between the ages of 21 and 25 to have held a full driving licence for a certain period of time in order to hire a car. Most insurers charge higher premium rates and policy excesses to drivers under 25.

Risk Management

There are several practices self-drive hire companies can adopt to manage their risk:

  • Prior inspection—Conduct an inspection of the vehicle accompanied by the hirer before handing it over to identify and record any previous damage. This will prevent any ‘unexplained’ damages.
  • Vehicle maintenance—Service and maintain vehicles according to manufacturer specifications to promote longevity and increase safety.
  • Limiting duration and distance—Implement a programme that limits consecutive and total kilometres travelled. Use tachographs, or machines that measure vehicle speed, distance and driver activity, to ensure compliance.

As the operator of a self-drive hire business, you face tremendous risk. But purchasing comprehensive self-drive hire cover and instituting proactive risk management tactics can help bolster your business and ensure future profitability.

Contact us today to learn more about self-drive hire insurance.

How can Business Insurance Service help Self-Drive Hire Operators?

Whether you’re a sole trader or a small to large company, your insurance portfolio has to be up to date and provide you and your business with the right level of protection. Rather than trying to find liability or motor fleet insurance by hunting through countless websites, let us or our website do it for you.

We’re members of the British Insurance Brokers Association (BIBA) and work with some of the largest and best-known insurance providers in the UK, including Lloyds of London for larger, more complex and high-risk customers. We’re fully regulated and committed to delivering a premium quality, trustworthy and reliable service to all our customers, regardless of size.

As preferred brokers working with some of the largest insurance providers in the UK, we have immediate access to a huge range of policies for various businesses, including vets and surgeries. We provide our customers with a bespoke or package service, creating insurance portfolios that are specifically tailored to your individual needs, and your budget.

A fully accredited service delivered by professional brokers

To find out more about insurance for self drive hire operators call us on 01273 789 979

Email us at hello@businessinsuranceservice.co.uk

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    We’re members of the British Insurance Brokers Association and work with some of the largest and best-known insurance providers in the UK, including Lloyds of London for larger, more complex and high-risk customers. We’re fully regulated and committed to delivering a premium quality, trustworthy and reliable service to all our customers, regardless of size.