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Motor Insurance
Tuesday, May 13, 2014 - 12:58
Cautionary note

With the latest increase in fuel prices, carpooling is seen as the answer by many: by having more people using one vehicle, carpooling reduces each person’s travel costs for fuel, maintenance, tolls and, relieves the stress of driving. Carpooling is also seen as a more environmentally friendly and sustainable way to travel as sharing journeys reduces carbon emissions, traffic congestion on the roads and the demand for parking spaces. “One question remains though,” says Hannes Smith Head: Old Mutual Collaboration, Personal Lines at Mutual & Federal, “do policyholders actually understand the differences between carpooling and fare-paying and the insurance ramifications to engaging in these activities?”

Most insurance policies include carpooling. “Carpooling is providing lifts to passengers as part of a vehicle sharing agreement for social or commuting purposes with no profit gained,” he explains. “For example, if there are four people travelling together, each of these individuals will take turns to use their own vehicles, and will be responsible for the petrol and maintenance of their own vehicle.”
Fare-paying is when passengers are paying for transport in instances such as a taxi service and/or public transport. “Traditionally a personal short-term insurance policy will not cover this type of risk as the owner of the vehicle is deriving an income from the use of the vehicle. Fare-paying cover can be obtained through a Commercial policy.”
If you decide to join a carpool, what do you need to do?  Contact your insurance provider or your insurance advisor and let them know. “At Mutual & Federal our motor policies automatically include carpooling. But we recommend that policyholders nevertheless inform us. When taking a policy most clients will have to stipulate the use of the vehicle so when the use changes, it has to be disclosed to the insurer so as to avoid future claims being rejected.”
Does carpooling change you premiums? Most short-term insurance companies are using or have moved to a risk-based pricing model where each individual is priced according to their own risk. Some factors that the insurers will take into consideration are:
• Whether you are deriving a profit by receiving payment from your passengers;
• The regular driver of your vehicle;
• The number of people being transported regularly as part of your carpool and imposed liability;
• Your passengers should be aware that in an event such as an accident they will be able to claim from you for bodily injury subject to the terms and conditions as stated in the policy.

As the need to carpool increases it is imperative that short-term insurance providers are contacted and kept up-to-date on policy changes in regard to carpooling. Also it is important that passengers and drivers understand the insurance implications of travelling together.

Copyright © Insurance Times and Investments® Vol:27.5 1st May, 2014
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