Major motor insurer GT is urging heavy motor fleet operators to review their insurance as rising costs expose operators to extra worries.
The heavy motor fleet industry currently faces vehicle shortages and rising costs that are impacting its insurance premiums. A combination of growth in fleet size and the harmful effects of inflation is putting operators at risk of costs that could hit their bottom lines. “We have had over 12 to 18 months of strong consumer spending, which has meant more opportunities for our commercial customers who, to meet demand, have been expanding and upgrading their fleets with new vehicles,” says Ben Briscoe, general manager for underwriting and technical services at diversified motor and marine specialist GT Insurance. The recent growth in truck fleets in Australia has been record-breaking. Truck Industry Council data shows that truck and heavy van sales totalled 44,379 units last year, an increase of 7.2% on 2021 and the highest annual number ever recorded. Within these figures, heavy truck sales set both quarterly and annual sales records – the quarterly figure beating a record that had stood for 15 years.
Heavy motor vehicle sales set records
Part of the reason for these record numbers is catch-up sales after they fell in 2020 and 2021 due to COVID-19. Another is the shift to online shopping and its related transportation needs, which appear here to stay. Record sales in recent years created vehicle shortages, resulting in wait times of up to a year for some models as supply chains around the world snarled amid a shortage of critical parts like semiconductor chips. Regardless of the underlying factors, the effect on insurance markets is clear.
“This has impacts on claims costs due to increased value of new and used vehicles, longer wait times on replacements, and increased hire-car costs for both first and third parties involved in claims,” Briscoe says. In addition to claims inflation, labour shortages are also driving up costs. With unemployment sitting at near-50-year lows, another challenge is finding experienced drivers. This, too, appears to be a trend that may continue in the longer term as the workforce in trucking is both shrinking and ageing, with the average age of truck drivers now close to 50 years.
Labour and parts scarcity affecting the cost of repairs
“The average repair of a motor vehicle [is] costing between 8–11% more than it did this time last year for the same work, depending on the type of vehicle,” Briscoe says. If a vehicle requires repairs, not only will it cost more to repair, but it may also take more time to fix. And, while the strange pandemic phenomenon of a used Toyota Land Cruiser being pricier than the new model is behind us, vehicle manufacturers are now lifting price tags on new models. Repair, or buy new – either way, there is no good option. “Owner operators [are feeling] the pinch waiting for replacement vehicles which, due to supply issues, are taking longer to procure and leaving them out of pocket for lost income whilst they’re not on the road. “The current market highlights the importance and value for businesses of engaging an insurance broker to help them review their insurances and to ensure they’re adequately covered,” Briscoe says.
Review your Motor Vehicle Sums Insured
“Reviewing motor vehicle sums insured and organising insurance to cover income can make a difference – an owner-driver with downtime cover can rest easier in the event of a claim, knowing that they’re insured for lost income up to their specified limit during the repair or replacement of a motor vehicle,” Briscoe says. Other measures when times are tough include looking for new customer segments or finding your own ways to save money within the business itself. This might involve lifting productivity by using better technology and acting on opportunities to cut expenses where possible.
Briscoe also points out the positive effect of retaining staff who provide good customer service. “From an insurance perspective, having good drivers who take care, paired with great safety processes, can help avoid claims and keep your insurance premiums lower.”
Take into consideration the Inflation factor
Inflation may be a factor that is here to stay, at least for a while. A recent Allianz research report pointed out that five drivers – demographics, deglobalisation, decarbonisation, digitalisation and debt – together have the potential to lift annual inflation globally by up to one percentage point in the coming years. Drill down into the ‘5 Ds’ above, and it becomes clear that many are relevant to the Australian transport sector. The inflation driver of decarbonisation, however, will involve a transition for the trucking industry. “We are seeing the EV and hydrogen trucks being delivered to our customers as alternatives to fossil fuel,” says Briscoe.
A recent examination of industry data showed that
trucks currently consume 23% of all road transport fuel, despite only travelling 8% of all road vehicle kilometres and comprising 4% of the entire Australian road vehicle fleet. There are now over 20 different electric utility vehicles, vans and trucks available in the Australian market, with more in the pipeline for release this year and next. Although the share of the overall heavy vehicle market is still low and the EV charging network is a work in progress, the sector is expected to grow.
EV trucks are currently much more expensive than their internal combustion engine (ICE) equivalents, but vehicles using the new technology will save on some inflationary costs such as fuel and servicing due to the longer distances they can travel each year, compared to ICE trucks. It is also projected that within five to 10 years manufacturing will start to achieve better economies of scale as battery costs and performance improve.
In the meantime, it pays for heavy motor fleet operators
to keep their insurance coverage up to speed with inflationary impacts (Article courtesy of Insurance News)
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