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CGI — Commercial General Insurance

Commercial Motor & Fleet Insurance

Commercial motor and fleet insurance covers the vehicles a business owns, hires or operates — from a single delivery van to a large fleet of goods-carrying lorries — providing at least the compulsory third-party protection required by law and, where bought, comprehensive cover for the insured's own vehicles, with premiums often rated on the fleet's own claims experience rather than on individual drivers.

9 sections~6 min read

Must-know for the exam

Commercial motor insurance covers vehicles used in a business — vans, lorries, prime movers, buses, taxis and special-type vehicles — and is underwritten differently from personal motor because of commercial use and paid/company drivers.
Third-party cover against death and bodily injury to others is COMPULSORY by law for any motor vehicle used on a road; own-damage cover is optional and chosen by the business.
The compulsory regime exists to ensure innocent road-accident victims are compensated, and lets injured third parties recover directly against the insurer in defined circumstances.
Cover levels mirror personal motor: third-party only, third-party fire and theft, and comprehensive; the choice trades premium against protection of the business's own vehicles.
Third-party bodily-injury liability is usually unlimited, while third-party property-damage liability is subject to a stated per-accident limit — important because commercial vehicles can cause large losses.
A standard commercial motor policy insures the VEHICLE, not the CARGO; loss of or damage to goods carried is covered under a separate goods-in-transit or marine cargo policy.
Goods-carrying underwriting turns on the nature of the load (especially hazardous goods), radius of operation, and whether the vehicle carries the insured's own goods or goods for hire and reward.
A fleet policy insures many vehicles under one contract with a single renewal, flexible mid-term additions and deletions, and is often written on a declaration basis with premium adjustment.
Large fleets are EXPERIENCE-RATED ('burning cost') on their own past claims (commonly three to five years) rather than on individual vehicle/driver profiles or a per-vehicle no-claim discount.
A good fleet claims record earns a lower rate; a poor record is loaded — one driver's accident affects the whole fleet's rating; small fleets rely more on standard book rates for statistical credibility.
Named-driver cover limits driving to listed individuals (cheaper); any-authorised-driver cover lets any permitted, licensed driver drive (flexible) and is common for large fleets, subject to minimum driver criteria.
Allowing an unqualified, unlicensed or excluded driver to use a vehicle, or using it outside its declared use, can breach the policy and prejudice a claim.
Hired-in vehicle and hired-in plant covers protect a business's legal responsibility for equipment it does not own, indemnifying it for damage to the hired item (and often continuing hire charges) under the hire contract.
Full disclosure of vehicles, use, drivers and claims experience is essential at inception and each annual renewal; in Singapore the compulsory third-party regime and MAS/GIA conduct standards frame how commercial motor is sold and claims handled.

What commercial motor insurance covers

Commercial motor insurance protects vehicles used in the course of a BUSINESS rather than purely for private, social and domestic purposes. The subject matter ranges widely — private cars used for business calls, vans, pick-ups, lorries and prime movers, buses and coaches, taxis and private-hire cars, motorcycles used for delivery, and special-type vehicles such as tippers, tankers and refrigerated trucks. Because the exposure is generated by commercial USE and by paid or company drivers, it is underwritten and priced differently from personal motor cover.

Every commercial motor policy performs three broad jobs, subject to what the client buys:

•LIABILITY TO THIRD PARTIES — for death, bodily injury and damage to third-party property caused by the use of the vehicle. This is the legally required core of the cover.
•DAMAGE TO THE INSURED'S OWN VEHICLE — accidental damage, fire and theft of the business's vehicles, where comprehensive or fire-and-theft cover is purchased.
•ANCILLARY protections — such as the driver's legal liability, medical expenses, towing/recovery and, by extension or separate section, the goods and equipment carried.

The insured's insurable interest arises from OWNERSHIP of the vehicles, from legal responsibility for them (as when they are hired in or held under hire purchase), and from the potential LEGAL LIABILITY the business incurs when its vehicles are used. As with all general insurance, cover responds only where an insured peril is the proximate cause of the loss and the vehicle is being used within the policy's stated use and driving conditions.

The compulsory third-party requirement

The foundation of all motor insurance — personal or commercial — is the COMPULSORY requirement to insure against liability for death or bodily injury caused to THIRD PARTIES by the use of a motor vehicle on a road. In Singapore this obligation is imposed by the Motor Vehicles (Third-Party Risks and Compensation) legislation, and it exists to make sure that innocent road-accident victims can be compensated even if the motorist responsible cannot pay.

The key features of the compulsory requirement, described conceptually, are:

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Traps that cost marks

Confusing commercial motor (the vehicles) with private motor or with cargo/property cover.
Thinking interest comes from a vehicle's characteristics rather than ownership, responsibility and liability.
Assuming comprehensive or own-damage cover is legally required rather than optional.
Believing own-damage protection is part of the compulsory requirement.
Reading the compulsory regime as protecting the insured's own assets rather than third-party victims.
Extending TPFT to accidental collision damage, which only comprehensive cover provides.
Confusing driving-basis labels with cover levels, or ranking TPFT above comprehensive.
Assuming property damage is unlimited, or that both heads share one cap.

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Exam-style questions

What does 'hired-in plant' cover typically indemnify the hirer for?Answer explained →Large fleets are commonly priced by experience rating (the 'burning cost' method). What does this involve?Answer explained →Regarding how experience rating affects a fleet's premium, which statement is TRUE?Answer explained →The note describes the Singapore compulsory regime, market conduct and GIA practices conceptually. What does this imply for an adviser?Answer explained →In a commercial motor policy, how do the third-party liability limits typically apply?Answer explained →

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