Cutting the cost of van insurance for young drivers

It can be prohibitively expensive to insure under 25s to drive vans, but ‘black box’ insurance can help

INSURING younger drivers for business vans can be expensive. Many insurers ramp up the cost if you need to insure under-25s for a business van.

But in a smaller business, people often need to perform several roles. You may have no option but to insure a young driver for a business van.

So how do you cut the cost of van insurance for young drivers? For some businesses, black box insurance can provide a solution.

Black box insurance has been available in the UK since 2008. It has many names – including smart box insurance, pay-as-you-drive insurance and telematics insurance.

With this type of insurance, the van is fitted with a ‘black box’ that records data, like a black box in an aircraft. (Trivia: black boxes on commercial aircraft are actually painted bright orange.)

Traditionally, the cost of insurance is based on a variety of factors, such as year of birth, driving history, postcode, type and age of vehicle and so on. It doesn’t account for how, when and where you actually drive. But black box insurance does.

How does it work?

So how does black box insurance work?

An unobtrusive box is fitted to the van and records facts about how and where you drive.

It can show if you brake harshly or smoothly; whether you corner more like Sebastian Vettel or his grandmother; how often you exceed the speed limit; the kinds of roads you drive on, A-roads, country lanes, urban streets or motorways; and the mileage you cover.

The black box will rccord whether you corner like Sebastian Vettel or his grandmother – far more relevant to the risk you represent than your date of birth

This allows the insurer to see exactly the kind of risk a driver poses – and adjust the premium accordingly. It’s a more accurate measurement involving an individual’s real-world driving behaviour, not simply his or her date of birth.

Prevailing evidence suggests that a black box encourages people to drive more responsibly, too.

This reduces the risk of accidents and cuts insurance costs and admin hassle. Promoting smoother, law-abiding driving also lowers the fuel bill, reduces maintenance costs and helps demonstrate your duty of care responsibility.

Some black boxes link to the drivers’ smartphones so they get a weekly ‘scorecard’ showing good and bad points

Some black boxes hook up to smartphones. The driver’s phone receives a weekly or monthly scorecard of their driving. So they can see what they’re doing right and where they need to improve. Better driving typically means cheaper insurance when the renewal falls due.

How widely available is it?

Black box insurance for vans is available but it has yet to be embraced wholesale by insurers. However, it’s already gaining popularity among young car drivers, and van insurers and manufacturers are catching on.

Citroën, for instance, has been offering its vans with standard-fit black boxes since 2006. These boxes are supplied by Teletrac, a leading telematics provider, whose black boxes can record not only insurance-related data but also wider van management information, such as vehicle location, GPS navigation, speed camera alerts and emergency and breakdown service contact.

Pat Gallagher, director of in-vehicle products at Teletrac, said: “If companies show their insurer they’re taking steps to ensure that their drivers are driving within the speed limit and [driving responsibly], then invariably reducing the insurance company’s risk will reduce the cost of the premium for next year.”

What about the cost?

If your van doesn’t have a black box fitted, a telematics-savvy insurer will usually include the cost of fitting one within the annual premium.

Removing it at a later date typically costs £40 but some firms will just switch it off when you’re done for no extra fee. And if you change the van, the cost for swapping it over is normally £40-50 but can be has high as £120 – so check the small print.

TomTom’s Link 510 Telematics unit costs £229, plus installation and a monthly subscription

TomTom is a leading suppliers of black boxes to fleets, brokers and insurers and its Link 510 telematics unit costs £229 plus installation and a £9 monthly subscription.

How do I save?

And likely savings? Telematic systems supplied by TomTom to Zenith Hygiene’s 120-strong fleet saved Zenith Hygiene £68,000 when it renewed its insurance and brought the driver excess down from £1000 per driver to just £250.

“But fleet size is irrelevant,” TomTom UK and Ireland director Giles Margerison told Business Vans. “It’s all about percentage savings. We expect our clients to achieve savings typically of between 10 and 20 per cent on their insurance cost by using telematics.”

That percentage concurs with research done by moneysupermarket.com, which put the average black box insurance saving for young drivers at 12.5 per cent. The British Insurance Brokers’ Association (BIBA) reckons the savings could even be as high as 25 to 30 per cent.

BIBA’s Graeme Trudgill told Business Vans: “There has been a massive increase in the use of telematics insurance. It has gone from 12,000 live policies in 2009 to 180,000 by the middle of 2012. It is set to hit 500,000 within the next two years.”

Malcolm Tarling of the Association of British Insurers (ABI) agrees that we’re set to see more telematics insurance. He told Business Vans: “The ABI is supportive of telematics insurance. It’s one way in which responsible young drivers can manage and reduce costs.”

If your current insurer or broker hasn’t embraced black box insurance yet, fear not. You can contact brokers and insurers who have by using the BIBA Find A Broker line (0800 950 1790) or visit www.biba.org.uk.

If you need business van insurance for a young driver, or for any driver, black box insurance can mean big savings – and not just on your insurance premium.