What drives your motor insurance premium?

A range of factors affect the premium you pay for your motor insurance. Basil Fry’s James Thynne looks at the insurer’s perspective and reviews some of the factors affecting it.

For most removal operators, motor insurance represents one of the largest fixed costs for the business. Despite this, many feel they have a limited understanding over how premiums are calculated and what steps are available to reduce costs. Insurers consider a wide range of factors when setting rates and understanding these can help removal companies improve the risk as well as the appetite of prospective insurers.

Understanding the insurer’s perspective

Insurers are businesses too, just like removals companies. Both operate in competitive markets, carry financial risk, and must make a profit to remain economically viable. For an insurer, a premium isn’t just about paying past claims – it must also reflect the likelihood and potential cost of claims in the future. In the same way a removals firm prices a job to cover fuel, labour and equipment, insurers price policies to meet future claims costs while keeping their business sustainable.

Claims history

Recent claims performance plays a crucial role when an insurer calculates a motor insurance premium. Insurers assess both the frequency and size of past claims to estimate future claims payments. In over-simplified terms, higher claims mean higher premiums. However, a high frequency of smaller claims can be more concerning to an insurer than a larger one-off claim, as it suggests a pattern which could continue in the future.

Maintaining detailed internal records, investing in driver training, and implementing telematics or camera systems can all demonstrate proactive risk management. Insurers are much more likely to price a policy favourably if they can see that a company is taking steps to reduce the likelihood of claims occurring.

Fleet size and composition

Most will appreciate from the outset that the number of vehicles on a policy has a direct effect on the premium. However, insurers will look at other aspects of the fleet when calculating their premium, including vehicle age, gross vehicle weights, vehicle values and vehicle use. Removal contractors must be insured for Hire and Reward – if this is not correctly declared and included, cover may be invalid in the event of a claim.

Business location

The location of the business also influences the likelihood of claims occurring, due to factors such as crime risk and traffic density. Where feasible, providing secure, gated parking and monitored premises can help offset a higher-risk location. Dashcams fitted to vehicles can reduce the risk of liability being attributed for incidents where policyholders are not at fault.

Radius of operation and European exposure

How far and to what locations vehicles are travelling is a factor considered by insurers. Local or regional operations are generally a lower risk compared to those undertaking long-distance or continental work. European exposure in particular introduces additional risk factors: differing road regulations, repair costs, driving standards, legal costs and language barriers. If continental work is only a small part of your operations, this should be made clear to your broker.

Quality of insurer and cover

Not all fleet insurance policies are created equal. Two quotes may appear similar in price, but the quality behind each can differ considerably. The insurer themselves plays a major part. Some providers invest heavily in claims handling and fleet support, offering responsive service, repair network access, and dedicated account management. The quality of cover also varies – some policies include broader terms and fewer exclusions, while others restrict cover or apply higher excesses.

It’s important to look beyond the premium figure alone. Understanding what sits behind the price – such as the insurer’s financial strength, claims reputation, and the breadth of policy wording – ensures value is compared, not just cost.

Summary

By treating insurers as partners and demonstrating proactive risk management, removal companies can not only reduce premiums but also build resilience for the future. The next time you review your insurance, don’t just ask ‘what’s the price?’ – ask ‘what’s driving it, and how can we influence it?’

James Thynne is Account Director at Basil Fry.

Click here to read the full story in the magazine.