Covid and Claims Costs: Under pressure but options abound

Has the COVID-19 pandemic affected your insurance come claims time? Yes, it has. Global supply chain disruptions, increased fuel costs, surging demand for consumer goods and ‘last mile’ deliveries, growing demand for vehicles, lower availability of vehicles and parts, low interest rates and labour shortages have all played a role.

In short, reduced supply of vehicles, parts and labour have pushed prices up. Tim Pontifex, NTI’s Head of Claims Services, explains how that’s impacting your claims and cover:

“There are so many different areas affected by COVID,” Tim says. “For example, if your vehicle’s involved in an accident and deemed not economical to repair, you may have a replacement vehicle benefit under the policy. With a number of different manufacturers, we’re seeing it take up to 12 months to supply that new vehicle.”

In such cases, NTI works with the customer and provides as many options as possible. That might mean replacing it with another brand with a shorter delivery time frame instead of cash settling the claim. Cash settling the claim is not the preferred option for many businesses because, as Tim says, “it doesn’t get the customer back on the road.”

It’s also critical to note that reduced supply and increased demand for vehicles and equipment have pushed prices up. Operators are being encouraged to review their cover with their broker to ensure their insured sums are still accurate. You don’t want to find that your cover leaves you short because market values have changed particularly the last 12 months.

Smash repair industry

When it comes to less severe incidents with a repairable vehicle, things are a little easier. “Parts is an interesting one,” Tim says. “Because our team has fantastic relationships with dealerships and manufacturers and access to a national network of parts suppliers, we’ve been a little bit protected. They’ve stocked up and had a reasonable supply in the country.”

“It’s only now we’re starting to see a delay in sourcing some parts. In particular, bull bars. With some suppliers we’re seeing delays of 12 months and beyond.”

But just as truck prices have gone up, so too upwards pressure on repair costs. The industry faces a labour supply shortage; fewer young men and women are entering the repair industry, and the average age is increasing.

“We’re seeing fewer kids leaving school in year 10 and doing an apprenticeship. It’s been a challenge for a number of years,” Tim says.

“To cover any gaps in their workforce, repairers did call on overseas labour. But now, with lockdowns and international border closures, smash repairers haven’t been able to get the skilled labour into their workshops to do the jobs.”

“We haven’t really seen much upward pressure on our claims costs from a repairs perspective. But what we’re starting to see now is that parts are getting hard to come by. We have to do things a bit differently. Freight costs are increasing, containers are getting stuck on docks. We have to use air freight a bit more, which adds cost.”

Making the best of a difficult situation

Tim suspects there’ll be significant upwards cost pressures over the next 12 to 18 months. Parts reserves will start running dry, skill shortages will bite and demand for transport services will continue to increase. One outcome has been to look at repairing damaged parts that, in previous times, would have been replaced.

“We encourage our smash repairers to repair a part if it’s more economical to do so and if it’s going to get the vehicle back on the road sooner. We provide a lifetime guarantee on those parts and repairs that NTI authorises,” Tim says.

He understands that while many customers will be happy to use repaired parts with lifetime guarantees, some won’t. One option in such cases is “to do a temporary repair to get a vehicle back on the road. And then, when the new parts come in, we’ll bring the truck back in and get the new part fitted and repairs finalised.”

“Our first priority is to get the vehicle or equipment back to work as quickly as possible.”

What you can do

Tim says you can do a few things to minimise COVID-related disruptions.

First, Brokers and business owners should work together to review sums insured. Vehicle prices are increasing, and getting an independent valuer to check your fleet will be money well spent.

And if you have an accident, contact NTI right away. “We have a 24/7 Service Centre in Australia. They can lodge claims immediately, and we can start identifying the best repairer for the circumstances,” he says.

“By notifying us shortly after an incident, we can arrange a tow if it’s not drivable and then get started on the repair. If it goes into one of our Premium or Local Repairers, they have authority to commence repairs as soon as it’s presented to them, so that can save days in itself.”

The goal is to get you back on the road or the jobsite – and making money – as quickly as possible. In the current climate, that’s a little more difficult than in previous years. But with a little preparation, prompt action in the event of an accident and the right coverage in place, you’ll be back up and running as soon as possible.