Inflation causing headaches for heavy motor
IN Partnership with
GT Insurance is urging heavy motor fleet operators to review their insurance as rising costs expose operators to extra worries
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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 pernicious 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.
GT Insurance is an award-winning specialist underwriting agency that has been catering to the needs of fleet and heavy vehicle operators for over 25 years. Fully backed by Allianz Australia Insurance Limited, GT is Australia’s most diverse commercial motor underwriting agency, now complemented by AM&T, specialists in the Australian marine and transit insurance market. Our philosophy of ‘fairness’ and local presence throughout Australia allows us to move quickly for our brokers and their customers when they need us most. It’s an approach that sees us consistently recognised for the strength of our relationships, quality of our solutions, and claims and customer service excellence.
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Heavy truck sales records in Australia
“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”
Ben Briscoe,
GT Insurance
The issue of having a vehicle off the road for longer can be addressed by GT’s Business Interruption/Downtime cover, which is available to heavy motor vehicle owner-drivers.
“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.”
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.
Briscoe admits that it won’t be a quick transition, but it’s one that GT is preparing for.
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Higher inflation may prompt action
Long-term trends
Published 17 July 2023
“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”
Ben Briscoe,
GT Insurance
2022
4,379
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Quarterly record
(Oct–Dec)
Annual record
Previous record surpassed by
4,041
2022
14,966
14,344
4.3%
8.4%
Source: Truck Industry Council
Heavy trucks sold
Electric vs diesel fuel costs
Cost to run diesel truck 300km
Cost to run electric truck 300km
$117
$18
0
$20
$40
$60
$80
$100
$120
Source: Australian Trucking Association
“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 is also affecting the cost of repairs.
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.
“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.
“The transition brings new considerations such as how we assess claims, repair the vehicles and their power sources, and replace them with limited supply available,” Briscoe says.
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.
“We look forward to supporting our customers as they introduce these vehicles into their fleets,” Briscoe says.
In the meantime, it will pay for heavy motor fleet operators to keep their insurance coverage up to speed with inflationary impacts.
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This article has been prepared by GT Insurance. In some cases, information has been provided to us by third parties, and while that information is believed to be accurate and reliable, its accuracy is not guaranteed in any way.
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Copyright © 2023 KM Business Information Australia Pty Ltd
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Contact Us
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Resources
Risk Management
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