In the last year, I have often encountered a new situation. Many companies with serious car parks prefer not to close CASCO insurance. That means they take the risk of damages instead of paying an insurance company.

After all, the reason why this happens is not hard to understand. Every well-run company has a budget for the fleet. From this budget, leases are paid, if necessary, car maintenance, road taxes, taxes, RCA and CASCO. Just for one of these parameters, the RCA, the costs have soared to exceed the budget. And companies have been forced to find a unique solution for the only cost that is not mandatory, the CASCO insurance. So, he likes to put aside the money he would have had to pay for CASCO for the entire fleet and repair the cars at their expense in case of damage. Instead of paying an insurance company to take the risk, it assumes the companies hoping that at the end the amount paid will be lower.

We have to understand that insurance at the base is 99% calculation and 1% inspiration. It is a calculus of probabilities, extremely complicated in some cases, but starting from a simple principle: what are the chances for the insured event to occur? If it occurs, the insurance company loses money, if it does not, it earns money. And here comes the 1% who inspiration, end the policy and take the risk or not? And customers do exactly the same calculation, just from the reverse.

And here’s how companies become small insurance companies for their own car parks. I talked with top managers who resorted to this solution trying to find the data and motives behind. The number and type of damage in recent years versus the amounts paid for CASCO have been taken into account, plus another aspect: empowering employees. Without a CASCO insurance back, managers hope their employees will drive more carefully, more responsibly and the number of incidents will drop. Finally, here comes the inspiration, they decided to risk. Well, in many cases I understand that this was the only solution.

However, reality may be different. Employees may be stressed with a much lower productivity, especially if at some point the company starts to penalize them for damages trying to further reduce their costs. Which could lead to a significant decrease in turnover, but we will only see this in a year or two.

Now, returning to the insurance market, it is, from my point of view, an alarm signal, especially because it is not an isolated case. Practically, raising the RCA price also causes losses to insurance companies. All companies that have car parks are machine-dependent, which means they have to pay RCA insurance. If this cost has risen beyond what the business can supply, it should be covered elsewhere. The problem is that we risk entering a vicious circle, as the cost of compulsory insurance increases, will reduce the number of optional policies. The problem is that as we know the mandatory policies are the least profitable for the whole insurance industry.

Every client, company or individual has a budget he / she is willing to pay on insurance, optional or mandatory. If overtaken, it means that money will be taken from elsewhere, and voluntary policies are among the first to target. There are too few cases where incomes are so high that insurance costs are irrelevant and I do not think the insurance market has to rely on that.

In the long run, such a situation can be a loss for both parties. The insurance industry can also decline with long-term negative effects, and companies may find it a good idea to manage the risk until the first really big damage, at a slightly inappropriate time. When you are no longer insured, several damages one after the other can destabilize the company.

In short, I think that for companies it is not a viable solution because you are too lucky, and on the other hand, insurance companies need to analyze in more detail what long-term effects the high prices of mandatory insurance.