Pricing excess reduction properly

In the pillar we called excess reduction the biggest single revenue layer in vehicle hire, and then moved on. This is the article where we stop moving on. If you run a fleet in New Zealand and you want one thing to get right this quarter, it is this one, because no other layer rewards attention the way this one does.

We run Jimny Rentals and Dream Drives, so everything here comes from collecting real premiums and paying out on real damage, not from a model. The mechanics look simple. A customer carries an excess, you sell them a product to lower it, you collect a daily premium. What makes it hard, and what makes it lucrative, is that you are not really selling a product. You are running a small insurance book, and most operators price it as if it were a snack at the counter. If you want to put your own attach rate and claims experience against these numbers, the Revenue Stack calculator is built for exactly that. This is the map. How rental businesses actually make money in NZ is the territory it sits inside.

You are running a small insurance book

Here is the shift that changes how you price. Every time a customer takes your excess reduction, you have written a tiny insurance policy. You collect a premium, and you carry the risk that this particular hire comes back damaged. Across a year you write hundreds of these policies. Some pay out. Most do not. The book, not the single policy, is what makes or loses money.

So the maths is not "what will a customer pay for this". The maths is premium collected, minus expected payouts, across every hire that attaches. That is the only sentence in this article you need to memorise. If the premiums you collect across the whole book comfortably clear the claims you pay out across the whole book, you have a good book. If they do not, no amount of clever checkout copy will save you, because you have underpriced the risk.

This framing does two useful things. It tells you the premium has to reflect real damage experience, not a number that felt about right. And it tells you why the layer is so profitable when it works: you are collecting daily on a fleet that mostly comes back fine, and the boring costs of running those vehicles are already paid by the base hire. Almost every premium dollar that is not eaten by a claim lands near the bottom line.

You are not pricing a product. You are pricing a book of risk, and the book is what has to balance, not the sale.

Setting the excess reduction ladder

We seed a three rung ladder in the product, and it is the shape we would recommend to almost anyone starting out. It works because it gives the customer a real choice at three price points rather than a single yes or no.

• Standard excess, no charge. The customer carries the full excess, a 2,500 dollar default in our product. This is the "do nothing" rung, and it has to be a genuine option, not a trap. More on that below, because it matters more than it looks.
• Basic reduction, around 25 dollars a day. This takes the excess down to roughly 1,000 dollars. It is the middle rung, the one that catches the customer who wants some comfort but balks at the top price.
• Premium reduction to zero, around 45 dollars a day. This takes the excess to nothing. The customer walks away liable for essentially nothing on the damage side, and they pay for that peace of mind every day of the hire.

All three figures are GST inclusive at 15 percent, as every price in New Zealand should be quoted. They are real product defaults, but treat them as a starting shape, not gospel. Your vehicle values, your customer mix and your damage history should move them.

The important commercial point is where the margin sits. It is the premium rung. In our own fleets, premium excess reduction can be worth up to about half the daily hire rate again on top of the hire, and it attaches to exactly the customers most anxious about damaging a car that is not theirs. That is not a coincidence. The customer buying the top rung is buying calm, and calm is worth a lot to someone about to drive a strange vehicle around unfamiliar roads. Price the ladder so the premium rung is easy to reach and clearly better value than it looks, because that is the rung that carries the book.

Attach rate is everything

You can have a perfectly priced ladder and make almost nothing from it, because the number that decides your excess reduction revenue is not the price. It is the attach rate: the share of hires that take a paid rung. Double the attach rate and you have roughly doubled the layer, without touching a single price.

Attach rate is not won by selling harder. It is won by presentation. The single biggest lever is making excess reduction a default choice inside the booking flow rather than a pitch someone has to deliver. Offer it at checkout, with the three rungs laid out and the premium rung framed as the calm, sensible option. Then offer it again in the booking portal before pickup, because a customer who clicked past it while comparing prices will often reconsider once the trip is real and imminent. Two considered touchpoints, both built into the flow, beat one aggressive one at the counter every time.

Framing matters as much as placement. Sell the outcome, not the mechanism. Nobody wakes up wanting to reduce their excess from 2,500 to zero. They want to not lie awake worrying about a stone chip on a mountain road. Lead with the peace of mind, show the excess figure dropping, and let the daily price sit next to a benefit the customer already feels. Customers genuinely value the premium cover, and framed honestly they take it gladly rather than grudgingly.

The counter is the worst place to sell excess reduction, because it depends on your busiest person remembering on your busiest day. Put it in the flow and it sells itself.

Loss ratio and claims experience

Insurers talk about loss ratio: claims paid out divided by premiums collected. It is the health check for your book, and you should be able to say roughly what yours is. A book where payouts eat most of the premium is barely worth running. A book where payouts are a modest fraction of premium is one of the best lines in the business. Same product, wildly different outcomes, and the difference is claims experience.

The trap is pricing one flat premium across a fleet that does not carry one flat risk. Some segments and vehicle classes are simply claim heavier than others. A soft roader heading into ski season on icy access roads is a different risk from a small hatchback doing airport runs. If a class or a segment runs claim heavy, the honest response is not to refuse it. It is to price the premium on that class to reflect its real loss experience, so the book still balances on that slice rather than being quietly subsidised by your safer hires.

This is where keeping records pays for itself. If you cannot say which vehicles and which segments generate your claims, you are pricing blind and hoping the averages hold. When you can see it, you price each slice to its own experience and the whole book gets healthier. The other half of this equation is how much of each claim you actually recover when damage happens, which is a separate discipline with its own leaks, and we go deep on it in Damage recovery done right.

The ceiling, and the honesty that keeps the book alive

There is a ceiling on all of this, and pretending otherwise is how operators wreck a good book. You can push attach rate and premium too far, and when you do, it shows up as complaints, chargebacks and one star reviews that cost you far more than the extra margin was worth.

The worst version of pushing too hard is making the standard excess deliberately punitive to force the upsell. If your no charge rung carries an excess so brutal that no reasonable person would accept it, you have not built a ladder, you have built a shakedown, and customers can smell it. It converts the premium rung from a genuine choice into a ransom, and the reviews will say exactly that. Keep the standard excess at a level a sensible customer could actually live with. The paid rungs should win on comfort, not on fear.

The same restraint applies to the premium itself. The right price is the one where a customer looks at the cover, feels it is fair for the risk you are carrying on their behalf, and still leaves you a healthy margin. That is a wide and comfortable band. You do not need to gouge to make excellent money here, and gouging is a false economy, because a book priced to exploit generates the disputes and chargebacks that eat the very margin you reached for. A fair book, priced with a straight face, is the one that is still paying you in three years.

How Glovebox handles this

Everything above is true whether or not you use our software, and we would rather you took the framing than the product. But the recurring failure in this layer is not pricing. It is that the best laid ladder earns nothing on the hires where nobody offered it. Attach rate dies at the counter on a busy day.

So Glovebox surfaces excess reduction as a default step at checkout, with the three rungs laid out, and again in the booking portal before pickup, so a customer who skipped it while price shopping meets it once more when the trip is real. Attach stops depending on whether your busiest team member remembered. The bond and cover mechanics behind it, including whether a bond is held as a pre-authorisation or charged, live under bond and damage cover. The default bond is 500 dollars, and a hold releases cleanly when the vehicle comes back fine.

That is the whole pitch, and we will leave it there. If you want to see what a lifted attach rate does to your own numbers, put your fleet into the Revenue Stack calculator and toggle this layer. And if you have not read where this sits in the wider picture, start with How rental businesses actually make money in NZ and then work through the layer leaking most in your business.