KENNET DISTRICT COUNCIL
th Human Resources Committee – 16 June 2005
LEASED CAR INSURANCE
Joint Report by Andrew Hart, Financial Services Manager,
Anne Ewing, Head of Human Resources
1. Purpose of the Report
To present to the HR Committee a proposal to move away from a block policy
insurance arrangement for leased car insurance to one where lease car drivers will
be asked to arrange their own insurance and be reimbursed from the authority (up to
a maximum level of ?450 (or pro rated equivalent)).
2. Financial Implications
There will be resultant savings to the Council, which will make the lease car scheme
more secure. It is anticipated these will be in the order of ?30,000.
3. Staffing Implications
No direct implications in relation to the staffing levels of the Council.
4. Legal Implications
There are no legal reasons that preclude the authority from making the change. Staff
contracts may need to be amended and it would be prudent to get the consent of the
lease car companies in writing. The council would maintain the block policy to cover
day to day hire vehicles and so many of the risks associated with staff arranging their
own insurances would be mitigated. A series of checks would be introduced to
ensure that insurance policies were in place.
Kennet has operated a lease car scheme for essential car users and casual car
users of Principal Officer grade and above for a number of years. There are currently
73 lease car holders, of whom 69 are aged 25 and above (the point at which
insurance becomes significantly cheaper).
This scheme has proved a valuable recruitment and retention initiative particularly in
today’s climate when many local authorities are dispensing with their lease car
schemes on the grounds of cost. Staff entitled to a lease car, have the complete
freedom to choose their preferred model and engine size subject to a contribution
over and above their entitlement. Kennet has always operated a block insurance
policy to cover any officer entitled to a lease car.
Over the last few years the premiums for the block policy have risen greatly to a point
whereby Kennet are currently paying over ?1,100 per vehicle which is not
sustainable in the longer term. It is not clear why premiums have risen greatly.
Kennet’s accident record is not poor, although there are a number of drivers who
have had multiple own fault accidents. However, over the last few years Kennet have
been proactive in managing risk and all drivers have received driver training which
has resulted in fewer own fault accidents. Although there are a few cars that would
be classed as high risk in insurance terms, again overall the fleet could not be
classed as being within high insurance groups.
There are a number of officers who are only entitled to receive a percentage of the
insurance cost and are therefore at risk of making quite a large payment to Kennet
for what in many cases would be low value / spec cars. In some of these cases the
rate is being kept artificially down currently.
6. The benefits of the scheme
The current scheme is a valuable recruitment and retention incentive in a climate
when many Councils are taking the decision to dispense with their schemes, or
modify them or make them less attractive to staff. Staff will still have access to a
? Allows them to choose their own car and specification, and to make an
additional contribution should they choose a high specification car.
? Makes a subsidy towards the cost of a lease car that in many cases covers
the whole cost, and has not been reviewed since the scheme was set up in
1991 despite the cost of cars having reduced significantly in the last few years,
thereby providing even better value to staff.
? Makes an allowance towards the cost of insurance that would meet the
requirements of the majority of our staff and their cars.
7. The proposal
Corporate Finance have carried out an exercise to find the typical insurance premium
for the benchmark car and found that in most cases drivers should be able to insure
their vehicles for less than ?450. It is therefore proposed that :
1. Lease car drivers are asked to obtain their own insurance for their lease cars.
The Council will pay a contribution towards the cost of the insurance or ?450,
which ever is less.
2. These contributions to the costs of insurance will be paid to the driver through
the creditors system on production of a valid insurance certificate and receipt
3. We will issue guidance on the minimum level of insurance that must be
provided and monitor insurance certificates against this checklist. (The
authority’s risk manager, Marsh, have been asked to advise but it is likely to
mean that the insurance should be fully comprehensive, include class 1
business use and legal cover, and acknowledge that the car is a lease vehicle
owned by a lease car company as a minimum.)
4. All reimbursement will be treated as contributions towards the business
element and therefore should be exempt from tax and NI. Kennet will obtain a
dispensation from the Inland Revenue.
thThe proposal is to implement the new insurance arrangement from 28 September
2005, the date of Kennet insurance renewal. This will require all current lease car
drivers to arrange insurance cover from this date. If approved, this will allow
sufficient time for staff to make alternative arrangements before the change over.
ndA report proposing these changes was taken to the Joint Consultative Group on 2
June. The Group accepted the necessity for these changes but asked that
consideration be given to any particular cases of hardship with younger drivers and
that a letter be provided from the insurers testifying to staff’s driving record in order
that they might claim their full ‘no claims’ bonus.
The Council’s block insurance policy for lease cars is becoming unsustainable in terms of cost. The report sets out an alternative proposal which should mean that
may drivers still receive 100% funding for their car insurance. It is inevitable that
some drivers with poor driving records or with high performance vehicles may have to
contribute towards their insurance for the first time but hopefully these will be minimal.
The move to self insurance should benefit all those drivers who currently only receive
a percentage insurance reimbursement.
The scheme has been an effective recruitment and retention incentive and it would
be detrimental to our position to dispense with it. This change reduces the cost
overall to the Council but retains the scheme as an attractive benefit for staff.
The Human Resources Committee is asked to approve the change to the lease car
scheme as set out in this report and in the attached revised scheme to take effect thfrom 28 September 2005.
Andy Hart Anne Ewing
Financial Services Manager Head of Human Resources
Lease Car Scheme