Even the safest drivers may be robbed of a no-claims bonus history when they switch from a company car to a cash allowance scheme, says Nick Golding
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Switching from a company car to a cash allowance scheme can impact on an employee’s insurance premiums.
A company car driver cannot build a no-claims bonus history while in a company car scheme.
Some insurers will be reluctant to insure a cash allowance driver because they prefer to concentrate on low-mileage drivers, with a perceived lower risk.
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Like well-wrapped presents, cash allowance schemes look highly appealing from the outside but it is not until employees get inside that they find out what actually lies beneath the surface. This is particularly true for staff who move into such a scheme from the traditional company car model.
Employers should ensure these staff are aware of the consequences of taking cash especially when it comes to insuring their car. When employers insure a fleet of company car drivers blanket coverage is given as opposed to individual accreditation. With this type of cover, drivers are unable to build an official no-claims history.
This can then mean that staff moving to a cash allowance may be faced with spending the majority of this on a car they cannot afford to insure. Malcolm Tarling, press officer at the Association of British Insurers, explains: "A claims bonus is based on domestic driving. Company car driving is a totally separate issue. Blocks of drivers are insured [so] there is no individual assessment of a driver’s characteristics."
This is a problem for company car drivers, many of whom are unaware they will not be able to benefit from a discounted rate of insurance when they come to insure a personal car. Diarmuid Fahy, fleet risk manager at ING Car Lease, says: "If someone has been driving a company car for any length of time, they will have built no formal claims history in that time, so will find their insurance premium to be surprisingly high if they move from a company car to cash allowance [scheme]." Although staff should be aware of the issues that surround insurance premiums, however, there may be ways around the problem.
In many cases, staff who choose the cash option can still benefit from discounted insurance. David Atkins, senior consultant at Monks Partnership, says: "Normally, a company will provide the driver with a document detailing that the employee has not had an accident [while] using a company vehicle, and some insurance companies will accept this as a no-claims bonus." This is not the only problem employees will have to overcome if they take the plunge and move to cash allowance schemes.
They may well find locating an insurer is difficult, as some larger companies will be reluctant to cover a high-mileage, high-risk driver. "Employees in a cash option may immediately think of the big insurance companies but they tend not to like business drivers. They prefer to concentrate on low-mileage, low-risk drivers and employers should be making company car drivers aware of this," says Atkins.
So with fewer insurance companies to choose from, cash allowance drivers will be forced to shop around for the right insurance deal, which could lead to them paying above average insurance premiums.