Market update – Motor, Plant & Equipment
The class remains relatively steady; however, insurers are attempting to push through increases and are using claims experience discounts (CED) – where the client receives a rebate for the previous year if they have had good claims experience subject to renewal – as a retention tool. These increases are driven by registered motor vehicles claims costs continuing to increase as vehicles become more complex and costly to repair.
The Australian climate conditions were terrible throughout the 2018 to 2019 period in New South Wales and Queensland after being relatively stable in the past four years. This has resulted in significant one-off losses being experienced by insurers in respect of hail, flood or bushfire. Summer is the most volatile period in the Australian climate, so insurers are likely to increase their pricing as a result of the summer season delivering severe weather events impacting loss records.
Storage risks continue to be difficult to insure, particularly due to hail events on the east coast of Australia. These risks continue to experience significant (upwards of 50%) spikes in pricing, or higher excesses being put in place for hail exposed locations – even where protection exists.
Insurers’ claims records suggest that despite the increase in vehicle safety and driver aids that claims costs are not reducing as a result – and the average cost of repair per vehicle continues to rise.
There is still a preference to place plant and equipment under a contract works policy (where the machinery is not operated on public roads). Insurers are becoming more resistant to this and the trend is now to eliminate the extension under the contract works policy. So, it may be that policyholders are forced to purchase cover under stand-alone policies and bear the higher cost of insuring plant and machinery.
Policyholders with positive claims histories and loyalty to their insurer will benefit with steady coverage and rating expected in this class. Companies must focus on risk management, in particular driver education on larger fleets.