With rising costs of machinery and materials, it’s imperative that adequate insurance is taken out to safeguard plant and machinery against financial losses from damage, theft, liability, and downtime.
The reminder has been issued by Underwriting Agencies of Australia (UAA), which specialises in insurance cover for industrial and commercial plant and equipment.
Its tailored policies have been designed with these industries in mind, covering their unique risks as well as ensuring that the comprehensive cover helps them recover from unforeseen events including increased environmental threats.
And as we head into the new year, UAA Chief Executive Officer Stan Alexandropoulos warns that a combination of factors makes it more important than ever that businesses do not neglect to ensure protection is in place.
- Environmental and climate risks
“We are seeing an increasingly frequent pattern of severe weather events such as bushfires, floods, cyclones, and storms causing property and equipment damage, construction delays and threatening the safety of workers,” Stan said.
“As well, new project sustainability requirements and more green technologies being introduced into the workplace.
“While they are great for the environment, they also come with new unfamiliar risks and exposures, making it difficult for insurers to assess and adequately price a risk threatening the sustainability of insurance capacity in the industry.”
- Economic factors and pressures
Stan said the rising costs of materials, equipment, and labour are increasing insurance assets and project values, which in turn drive up claim costs and claims incidence rates due to inexperienced operators.
“Increasing interest rates also mean higher borrowing costs, which may lead to delays and cancellations in contracts as well as the likelihood of businesses going into liquidation.
“To stimulate their economies and promote GDP growth, governments worldwide are looking to increase infrastructure spend to stimulate growth and promote economic recovery.
“This obviously provides growth opportunities for insurers, but also drives up exposure by introducing more activity, putting pressure on sourcing appropriately skilled and trained labour, which in turn results in more claims via human error and increasing inflationary costs of machines and projects with supply not keeping up with demand.”
- Technological advancements and changes
Stan also warns of the uncertainty surrounding the effects of artificial intelligence n automation.
“We are now seeing the integration of AI in the administration of businesses, boosting productivity and operational efficiencies,” he said.
“New battery powered and other types of clean fuel and renewable energy driven machines are gaining momentum.
“Telematics are also providing greater insights into the day-to-day functioning of earthmoving equipment, providing data to business owners which are helping to streamline maintenance and servicing programs on earthmoving fleets.
“Obviously, many of these developments bring additional risks that we need to understand. From an insurance point of view, we are continually evolving our products to ensure we’re covering these new and evolving risks in the earthmoving and construction industries.
“We are focused on providing the client with the correct cover on new risks associated with ‘clean energy machines’ and batteries, the storage of batteries and the potential for fire.
“We need to make sure our pricing is accurate and that we are covering the risks which is what sustainability is about.”
Industry also needs to consider the integration of new technology like IoT and digital twins.
“Networks of earthmoving equipment and machinery linked and connected via sensors, software and other technologies allows operators to track performance an assess real time conditions and risks, making operations more efficient and safer,” Stan said.
“These technologies also increase the risk of data breaches, cyber attacks and system failures causing accidents.
“Insurance products need to consider these risks and exposures and find solutions to cover them whilst mitigating them.”
In a nutshell
Sam said all of the above factors create challenges for the insurance sector.
“Some of these challenges include rising claims costs which has been a major factor since COVID,” he said.
“Insurance premiums haven’t kept pace with the rising costs of claims, putting pressure on insurers and causing some to reassess the sustainability of insurance coverage in some high-risk areas.”
This is where the UAA Group stands out.
“We have more than 50 years of expertise and intellectual property as specialists and experts in mobile plant and equipment insurance, and over 20 years in construction insurance,” Stan said.
“This experience has allowed us to proactively move with these changing conditions ensuring that sustainability and high-quality risk assessment, coverage and pricing has always been a priority for us and our customers. We intend to be around for at least another 50 years.
“A lack of skilled professionals in both construction and earthmoving hinders risk management and increases human error, increasing the number and severity of claims and making workplaces unsafe.
“The UAA Group regularly works with industry bodies via the exchange of claims experience data to target pain points and highlight areas that the industry needs to address to self-regulate, such as training standards and training adequacy.”
Stan said the earthmoving and construction industries were the driving forces behind infrastructure projects and development.
“Not much can happen without these industries. It’s a similar situation with insurance – it is the “enabler” that makes these things happen by providing the safety net for these large investments and assets, promoting project resilience managing disruptions without derailing the projects,” he said.
“Coverage of cyber risks, liability and new technology enables businesses to adopt new technologies taking advantage of market opportunities without fear of financial repercussions. The UAA Group is constantly working to innovate its systems and products to ensure that our customers are adequately covered and keeping pace with a rapidly changing and evolving market.
“In 2025 the earthmoving and construction insurance sectors will need to navigate rapidly evolving landscape.
“Insurers like the UAA Group, which adapt to these challenges by offering, innovative, tailored, niche expertise and sustainable solutions, will be well-positioned to support the industry.
“Insurance is not just a safety net but a strategic tool that a business needs for resilience and growth in a challenging and uncertain world.”