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HR Comm 16605 Leased Car Insurance - documentskennetgovuk

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HR Comm 16605 Leased Car Insurance - documentskennetgovuk

     FSM/04/2005

    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.

5. Background

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

    scheme that

    ? 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

    (annual premium)

    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.

    8. Consultation

     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.

9. Conclusions

    The Councils 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.

10. Recommendations

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

Background Papers

    Lease Car Scheme

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