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 Company bosses and fleet chiefs are being warned against invalidating their business motor insurance by covering a person not directly connected to the organisation on the policy.
The recently uncovered practice is known as ‘fronting’ and has been highlighted by insurance giant Norwich Union after it spotted the growing trend.
The person being insured is usually a family member of a manager or director, often a 17 or 18-year-old son or daughter who has found it difficult or too expensive to take out their own insurance
Highlighting how the practice can invalidate a company’s insurance policy and put the lives of young drivers at risk, Mike Smith, commercial motor technical manager at Norwich Union, said: “From the claims we have come across, we have seen some devastating consequences as a result of ‘fronting’.”
He warned: “To avoid any insurance cover problems, fleet managers need to be open and up-front with their broker and insurer, and ensure they are aware of who owns and drives all vehicles insured on the company policy.
“Brokers should ensure that fleet managers review company policies on who can drive company vehicles for social, domestic and pleasure use, including age of driver, and ensure adequate controls are in place including licence checking.”
Young drivers are almost 10 times more likely to be killed or seriously injured than more experienced drivers and the Government is presently consulting on improving training for young drivers to stem the death and injury toll.
Mr Smith said: “Although this may seem as though they are doing that family member a good turn by saving them some money, and the credit crunch may make this appear even more financially attractive, the risks to both the company and that young driver are substantial.
“‘Fronting’, in most instances, will invalidate the company insurance policy, leaving the business to pay for any damage to their vehicle. Also, if any other driver is involved in an accident, while the insurer will be required to meet any liability cost under the Road Traffic Act, they can seek recovery of any such payments from the policyholder.”
He added: “It is not just money that is at stake, however. The safety of the young driver, other passengers and road users is a vital consideration. Sometimes the fronted vehicle is a high performance car and totally unsuited to the young driver’s experience, driving behaviour and attitude.” |
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