Running a motor garage, car dealership or vehicle repair shop already has enough daily headaches. A declined insurance claim shouldn’t be one of them. Yet surprisingly often, motor trade claims get refused for reasons that could have been easily avoided.
In this post, we’ll cover some common reasons why motor trade claims are declined, what mistakes to avoid, and how to make sure your policy is working the way you think it is.
1. Vehicles Not in the Right Name
This one catches a lot of traders out. A motor trade policy usually only covers:
- Customer vehicles in your care, custody or control
- Vehicles owned and registered in the name of the insured entity
If a car is owned by a director, spouse, employee or subsidiary, and you haven’t declared it, your insurer could refuse to pay. The assumption that “it’s on the MID, so it must be covered” is a dangerous one, as insurers don’t rely on your MID updates to check risk.
The ABI’s commercial motor insurance guidance makes it clear that even vehicles owned by directors, if not declared correctly, could be left without valid cover.
Tip: Always make sure your insurer is made aware if vehicles are registered to anyone other than the business itself.
2. Undeclared Modifications and High-Performance Vehicles
We’ve seen claims challenged because the handling of modified vehicles wasn’t disclosed. Even involvement with vehicles that have undergone only cosmetic changes such as the fitting of body kits and swapping in of alloy wheels will be a potential issue if they’re not declared beforehand. Insurers will want to scrutinise the details of any quote for a motor trader insurance policy that needs to provide cover for vehicles with engine remaps and other performance upgrades. This is because these vehicles present a materially higher risk to motor trade insurance underwriters.
As well as modified vehicles, involvement with high-performance cars and prestige models will require prior acceptance from your trade insurer.
Failing to declare these activities could turn a claim into a very costly lesson.
3. Security Requirements Not Met
Your motor trade insurance may include strict security conditions. Common requirements often include:
- Overnight parking at a locked, gated compound
- Alarms, trackers or approved locks on certain vehicles
- Vehicle windows and doors are fully shut and locked when not in use
- Toolboxes and workshop entrances to meet specific security standards
If certain conditions aren’t met at the time of a loss, such as a vehicle theft overnight, the insurer may deny the claim.
If your business services, repairs or modifies vehicles then Plan Insurance Brokers can source a tailored Motor Trade insurance policy for you. If you have any more questions or would like a quote call our expert team, request a call back or fill in our new quick quote form.
4. Inaccurate or Outdated Policy Details
A combined motor trade insurance policy is flexible, but only if it reflects the reality of your business. Claims are often declined because of:
- Turnovers or staff numbers being understated
- Stock limits or vehicle values being exceeded
- Buildings, tools or contents sums insured being undervalued
It’s not just box-ticking. Insurers base their risk acceptance on these figures, so if they’re wrong, cover could be invalidated or claims payments reduced proportionately.
Inaccurate and/or out dated details might also result in you paying a higher insurance premium than you need to. By updating our records, we could help save money at renewal.
5. Lack of Trading Evidence
One of the main reasons a claim is declined under a motor trade policy is the absence of trading evidence. You must keep receipts for parts purchased, services offered, and vehicles sold to validate your trading activity.
6. The Myth of the “MID Update Defence”
A common misunderstanding is that adding a vehicle to the Motor Insurance Database (MID) guarantees cover. Unfortunately, it doesn’t.
Suppose the vehicle isn’t eligible for cover under your motor trade policy. In that case, the fact that it appears on the MID won’t protect you when making a claim. Insurers expect direct notification of any material changes, not silent updates.
7. Inaccurate Driver Records
Motor trade policy holders can often be caught out by the need to provide accurate, up-to-date information relating to the driving history of anyone covered by their policy. It’s especially common for driving convictions of named drivers to be overlooked. Insurers will have requirements in place to ensure named drivers meet certain standards. Undeclared convictions of existing drivers and the use of a new driver(s) with an unsatisfactory driving history could be picked up mid-policy term. If the claims and/or convictions are learnt about only after an incident has already occurred, it might lead to a claim being disputed by insurers.
It’s rare for a SP30 to be an issue. However, if it is combined with other existing convictions, it might cross an insurer’s acceptability threshold. Other offences should also be referred even if it is between inception and the renewal of a policy. If in doubt, always request clarification from your insurer. It may avoid a situation in which they refuse to provide cover.
Steps to Avoid Insurance Claim Denial
The good news is that most problems are avoided with proactive communication. Here are the basics:
- Declare everything: vehicles, drivers, ownership details, modifications and unusual business activities.
- Review your policy regularly: don’t assume it’s fit-for-purpose year after year.
- Check restrictions: such as driver age limits, high-value vehicle caps and usage types.
- Speak to your broker: If in doubt, pick up the phone. It’s quicker and cheaper than dealing with a denied claim.
Final Word: Prevention Is Key
The message is simple. Keep your broker and insurer fully informed and you can avoid unnecessary claim disputes and keep your business and its assets protected.
Declined claims are not just inconvenient. They can be financially damaging for a motor trader. The FCA claims handling rules require insurers to provide fair and reasoned responses when liability is in question. Claims cannot be rejected or payments reduced without strong grounds. Providing full and timely disclosure about vehicles, drivers, modifications or policy details is crucial to avoid potential issues.
Your motor trade cover is there to protect your livelihood. The best way to ensure it does just that is to supply your broker with detailed, accurate information and to avoid making assumptions.
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