IGA News

How supply chain issues can affect motor trade insurance

How supply chain issues can affect motor trade insurance

28 February 2022

The motor trade has been impacted by supply chain issues over the last 12-18 months, with a shortage of semiconductors in particular causing issues with new vehicle manufacturing. With fewer new cars finding their way to customers, demand for used cars – and their values – has been driven upwards.

All of this has had an impact on the service and repair sector. With more used cars on the road – and spikes in MOT demands following the pandemic – garages have seen issues with parts supply, labour shortages, and increasing costs adding to their challenges.

As insurers constantly analyse their risks, how do all these issues impact the cost and availability of motor trade insurance?

Why recent events impact insurance

There are many ways in which insurers evaluate risks. However, recent events have created a different landscape:

  • With used car values rising, their replacement cost also increases. When used cars become more valuable, they also cost more for insurers to replace should they be stolen, for example. Whether you have an element of car sales in your business or are simply looking after vehicles under your care, custody and control for your customers, this could impact on insurance costs.
  • Replacement parts have also increased in value. The scarcity of certain parts has driven their value upwards. Therefore, any parts that are damaged, lost in transit or stolen could cost more for insurers to replace. Garages with parts stored on the premises should look to cover their replacement costs with adequate insurance.
  • The cost of vehicle repairs has also increased. With everything from increased demand for our services to the cost of parts rising, the value of repairs charged to customers has increased. Insurers who settle claims not only for vehicle damage but also defective workmanship claims can be affected by this increase in costs, causing claims inflation, which can increase insurance premiums accordingly.
  • Delays to repairs can impact on insurance. When delays to vehicle repairs occur – because of issues in the parts supply chain, for example – then demand for courtesy cars can also increase while repairs are undertaken. Not only is this inconvenient for customers, it can also increase risks and the value of claim settlements for insurers.
  • The cost of living. Inflation has risen recently across the UK and Europe, with everything from energy costs to labour costs and the costs of transporting goods affecting garages. Insurance sums insured need to take account of these increased costs.

Insuring your garage effectively

Gallagher works alongside the IGA to ensure that its members can request appropriate insurance cover for their particular circumstances.

The UK Motor Trade team has Account Executives who work closely with garages across the country. They are specialists in covering motor trade risks, and can help in evaluating your risks throughout the year, ensuring suitable cover and support is in place for your business during changing times.

If you would like to review your policy before it is due for renewal – to spot potential underinsurance or coverage gaps – Gallagher can assist in offering advice, working with you to identify and help accommodate the risks you face.

Gallagher are pleased to advise that they have arranged inclusion of MOT Loss of Licence cover as standard for any RMI member with an authorised MOT test centre taking out an Allianz insurance package. This is available to RMI/IGA members when you purchase an Allianz Motor Trade Policy from Gallagher via the RMI. The Loss of MOT Licence cover is included in addition to the enhanced Gallagher/RMI Allianz policy wording already offered to members.

To discuss your insurance needs, please call the IGA Member Helpline on 01788 225 908 or email enquiries@rmif.co.uk.

For more information on Gallagher’s motor trade services, visit www.ajg.com/uk/motor-trades.

* https://www.smmt.co.uk/2021/07/staff-and-supply-shortages-threaten-uk-car-production-revival

** https://www.gov.uk/government/news/government-takes-historic-step-towards-net-zero-with-end-of-sale-of-new-petrol-and-diesel-cars-by-2030

The opinions and views expressed in the above article are those of the author only and are for guidance purposes only. The authors disclaim any liability for reliance upon those opinions and would encourage readers to rely upon more than one source before making a decision based on the information.

Arthur J. Gallagher Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered Office: Spectrum Building, 7th Floor, 55 Blythswood Street, Glasgow, G2 7AT. Registered in Scotland. Company Number: SC108909.