The COVID-19 pandemic has impacted businesses around the world in different ways. Here in Australia, the insurance industry – and the companies it protects – have seen new costs and challenges. Nick Dendrinos, NTI’s Head of Motor Portfolio, explains how the industry is travelling and how businesses can make sure they’re ready for the challenges ahead.
The most straightforward place to start is with business costs. Nick says that microchip shortages and fuel price increases have impacted businesses across the board.
“The cost of oil and fuel have a major impact on the production of raw materials, which in turn has an impact on things like the price of vehicle parts, building and construction parts.”
This uptick in prices coincided with a growing demand for vehicles and equipment, driven by many factors, including low interest rates and the instant asset tax write-off incentives.
“The huge explosion of e-commerce, wholesale goods market and the construction material markets have created a higher demand for freight movement,” he says.
“Which is fantastic, of course, but at the same time, that industry needs to move freight fast.”
The result is a significant backlog in new vehicle and equipment orders. Some original equipment manufacturers (OEMs) have closed their order books until 2023.
“The lack of availability of vehicles and equipment has put a hold on a lot of business’s plans,” he notes. “There’ll be patches of growth coming through when manufacturers start filling their orders.”
WHAT IT MEANS FOR INSURANCE
On the insurance side, the most important step any business can take is to review their policies and cover, with particular attention to their sums insured.
“At NTI we pay out the market value or the sum insured, whichever is the lesser,” Nick says. “The dynamic we have at the moment is that market values have in many cases surpassed the declared sums insured.
“At the same time, underlying inflation’s gone up as well. So the cost of repair is up too.
“The key message is for brokers and customers to work together to get their sums aligned to what their vehicles and equipment are worth now. We’ve seen 10 per cent increases, but for some specialised items, we’ve seen 50, even 60 per cent increases.”
TOTAL LOSSES AND REPLACEMENT
Upwards pressure on vehicle and parts prices is just one complication. In the case of a total loss or a replacement, businesses can face significant delays.
“That’s another reason to review the sum insured,” Nick says, “because there’s a ratio of when an item is deemed repairable or not. With a higher sum insured, you have more flexibility regarding the viability of repairs.”
Business owners have to be realistic and work with their insurers to find the best option for their situation.
FINAL THOUGHTS
Now is the time to review your values and ensure your cover reflects your assets.
“This is a time for brokers and businesses to review those values upwards. You want to make sure that if you do have a loss, you’re compensated appropriately for what your vehicle is worth,” Nick says.
“Review that sum insured and let your insurer know right away if it needs to change. You don’t want to get caught short.”
Want more insight from Australia’s leader in heavy vehicle, mobile plant and equipment insurance? Visit NTI’s Yellow Cover at www.yellowcover.com.au.