Market volatility drives insurer changes for ACT

Volatility in the cycle insurance market has resulted in most insurers backing away from the UK cycling industry, owing to poor claims performance, reports the Association of Cycle Traders (ACT).

As a result, the ACT, through its appointed insurance broker Butterworth Spengler, has, with immediate effect, moved its members business insurance from Covea to Aviva, one of the UK’s largest and best-known insurers.

The move was prompted by the previous insurer, Covea, withdrawing capacity across all its schemes in the UK with effect from the July 24th. This has resulted in many scheme holders all looking for new capacity at the same time. Unfortunately, reduced capacity generally results in higher premiums and more restrictive terms.

“There has been a marked increase in theft claims over the last 2 years which have sadly affected many policy holders,” explains Jonathan Harrison from the ACT.

“There have been approximately 200 theft losses on the scheme over the last 3 years with an average value for each claim of £35,000. For the scheme to remain sustainable long term we have had to accept some significant changes to the rate and to some of the conditions and endorsements that apply from Aviva.”

Although we can’t list all the changes here, some that specifically apply to members’ risk include: –

• Increased Material Damage Claims Excess
• Increased Theft Claims Excess
• Additional Internal Physical Security requirements
• Rate Increase
• Enhanced ID requirements for Hire & Demonstration cover
• Reduced limit of Products Liability cover for North American exports, together with country-of-origin restrictions and a higher excess to apply.
• Restrictions on cover for Stock in Shipping Containers

“Although many of the changes may appear harsh, they are necessary to stabilise the scheme performance and ensure that we can continue to offer the broadest cover to the cycling sector,” continues Harrison.

“Our efforts are designed to reduce the risk of thefts for all clients and the resultant impact on their businesses. One of the key observations from the last two years of theft claims is that most clients had a top specification of alarm, with police response and monitoring, but it didn’t prevent the thefts from occurring. In most instances the intruder alarm was activated but the thieves had filled a van and left before the police were able to respond. Our brokers are working very closely with Aviva to review the effectiveness of these requirements, and once there is an improvement in the scheme performance, together we will review rates further.”

Physical security is therefore of utmost importance.

Any cycle on display within the premises, with a value of £1500 of more, must be secured to the fabric of the building using a floor or wall anchor and either a flexible steel cable via the cycle frame or bicycle lock (for full theft cover to be provided).

Insurers are encouraging any additional physical security measures to be used internally which will deter or slow down any potential thieves, for example, smoke cloak fog systems; Master Blasters, Ram Raid Bollards etc.

There have also been some major losses from shipping containers, so cover is now restricted to following: –

• The container must be located at a premises owned or occupied by the Insured or within a secure Third-Party Location
• Maximum Indemnity in respect of theft from all containers at any one premises is limited to £15,000.
• Single Article Limit of £1500
• Excess is £1000
• The Container must be secured by a closed hardened steel shackle padlock and be fitted with a lock box.

The positive news is that the scheme and the enhanced cover features have been maintained. These include: –

• Full Theft Cover (subject to condition)
• Seasonal Increase in Stock cover
• No Claims Discount
• Hire & Demonstration Extension
• Automatic Cover for Events/Exhibitions
• North America Extension on Products Liability (limited to £2 million)

“Our brokers have worked extensively on this project fighting to ensure that we can continue to service our clients in the cycle sector with broad acceptance and policy coverage,” continues Harrison.

“As part of this process, they have remarketed all upcoming risks on an open market basis (meaning obtaining a quote on an ordinary shop package policy – with no scheme benefits) and have found that most e-trade insurers declined to quote due to the trade, or they failed to provide competitive terms. Many of the alternatives were just based on retail activities and did not take account of the broader range of activities many of cycle shops offer, and on referral of the wider activity lots of the insurers then declined to confirm terms. As a result of this work we are confident that the terms we are providing are the best for the cover available.”