20/09/2024
What's driving up the cost of haulage claims?
The insurance industry is experiencing claims inflation across many lines of business. And motor, haulage and fleets are no exception, with claims continuing to increase substantially.
The rising cost of claims is a significant issue for many businesses operating in the haulage sector, as it is adds further headaches to your business when you are looking to control your costs and cash flow.
Claims costs also put pressure on haulage insurance premiums as insurers look to recoup their losses in the form of increased premiums. Whilst good risk management, careful driver selection, and healthy financials form part of the picture which makes up an attractive risk for insurers, the other part is partnering with an insurance broker like One Broker. We have our own in-house claims teams to support our clients in managing a claim from start to finish, mitigating and limiting the impact on you, the insurer and any third parties.
Let's look at some reasons why claims are increasing and provide some much-needed context.
1. The Global Supply Chain Squeeze:
Global turmoil... it feels like a broken record but COVID-19 pandemic, the war in Ukraine, and Brexit have all significantly impacted global supply chains. Because the UK is reliant on imports for both new vehicles and parts, we face the brunt of these disruptions.
According to the Association of British Insurers (ABI), 40% of vehicle repairs are delayed due to parts shortages. This can be attributed to several factors:
- Semiconductor Chip Shortage: Modern vehicles are packed with sophisticated technology. Digital dashboards, remote diagnostics, and the ability to receive Over-The-Air (OTA) software updates all rely on these chips. Ukraine is estimated to produce up to 50% of neon, which is needed for semiconductor chips.
- Disruptions in Manufacturing: COVID-19 lockdowns and the war in Ukraine have disrupted production lines globally, further limiting the availability of parts.
- Brexit Impact: Despite the UK's exit from the European Union, many parts continue to be sourced from there. New trade regulations and customs delays have caused additional hurdles in the supply chain.
These delays lead to longer repair times, keeping vehicles off the road for extended periods. This, in turn, increases the need for replacement vehicles, which can be arranged via insurer deals (to keep the cost of claims down) or by credit brokers (who would typically increase the cost of a claim), which further add to insurers' costs.
2. Rising Costs of Repair:
It's not just parts – the cost of repairs is rising. This can be attributed to several factors:
- Inflationary Pressures: The general rise in inflation affects everything from labour costs to materials. Body shops and mechanics are experiencing higher operating costs, leading them to raise their repair charges.
- Increased Labour Costs: The automotive repair industry faces a skills shortage, particularly for handling vehicles with advanced technologies. The lack of available skills is pushing up wages in the repair sector, which filters into repair prices.
- Advanced Driver-Assistance Systems (ADAS): These systems, while enhancing safety, are complex and expensive to repair. A damaged sensor or camera on an ADAS-equipped trucks can significantly increase the repair bill.
- Cost of raw materials: The cost of parts is not the only factor putting pressure on repair costs; it’s the cost of raw materials like crude oil, too.
According to the ABI the cost of repairs jumped 32 per cent in the third quarter of 2023.
3. Increased Risk of Theft:
Unfortunately, a downturn in the economy precedes a rise in theft. According to the RHA, we are starting to see ‘movie style’ theft from trucks on motorways and long dual carriageways. In one particular case, £500m of goods were stolen by criminal’s.
In 2023, there were a reported 5,300 incidents of freight crime and a total of £68 million worth of goods stolen.
This translates to higher claim costs for insurers, which can ultimately impact your premiums.
4. Fraudulent Claims:
While most claims are genuine, a small percentage of fraudulent claims can significantly impact the overall claims cost for insurers. Fraudsters may try to stage accidents or inflate the cost of repairs.
5. Legal Costs:
Litigation costs associated with claims have also seen a rise in recent years. This can be attributed to factors such as the increasing complexity of personal injury claims and the rising cost of legal representation. These higher legal costs can ultimately push up premiums.
6. Rising Cost of Medical Treatment:
The cost of medical treatment also plays a role for personal injury claims arising from accidents.
With escalating healthcare costs, insurers' payments for medical treatment after an accident are also increasing.
For example:
The market for prosthetic limbs and devices is seeing price rises of between 5% to 8% annually, in part due to the increase in demand for prosthetics in Ukraine .
Another reason for the increase in the overall medical costs is the court judgments of Swift v Carpenter [2020]* and Riley v Salford Royal NHS Foundation Trust [2022]* which have assisted claimants in their efforts to push the legal boundaries and are often cited by leading claimant firms in relation to accommodation, life expectancy and loss of earnings.
How can we help?
There are undoubtedly many external pressures the haulage sector is facing, but if you do need to make a claim, it will feel like those pressures are doubling down on your business.
There are two key things that we recommend you review:
- First, make sure you review your insurance cover and claim experience with your broker. If your broker is not proactively managing your claims experience, insurers will not have a true picture of your business and will, therefore, make judgements based on inaccurate data.
- If you do need to make a claim, or a claim is made against you, don’t delay. Get in touch with your broker as soon as possible. Acting fast will give you the best chance of limiting the financial burden of the claim, and help get your vehicle back on the road sooner.
If you are in any doubt about your broker's services, we would be happy to answer any questions you have. Simply complete the form here or give our Haulage team a call on 01603 218228
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