Opinion

How the pandemic is affecting heavy vehicle insurance claims

If you happen to have been one of the unfortunates who have had to make a claim on their commercial truck insurance policy in the last couple of years, it is more than likely you would have suffered from a certain degree of heightened anxiety after you had received the verdict from your insurer’s claims manager or their loss adjuster (assessor).

Chances are that a contributor to the heightened anxiety may have been that the truck that you thought would be repaired, is declared an un-economical write off by a loss adjuster before you’ve even had time to wipe the tears from your eyes after your pride and joy has been in a bingle.

Unfortunately, it is becoming more and more apparent these days and most notably since Covid-19 reared its ugly head, that loss adjusters seem to be becoming very quick at declaring damaged vehicles an “Un-economical Write Off”.

In other words, it is a vehicle that is repairable – subject to each state’s roads authority’s legislation in relation to “Written Off” vehicles

A major reason for the high number of trucks being declared an Un-economical Write Off, is the method that insurers and loss adjusters have used for many years to determine whether to repair a truck or write it off. It is a simple formula.

The following three total loss definition extracts from three different insurer’s policy wordings provide an insight into how insurers definition determines the method of how they come declare a vehicle a write-off and are methods also used by other insurers and underwriters.

(1) Your vehicle will be declared a total loss if:

(a) the cost of repairing the vehicle plus the value of the salvage (if applicable) exceeds the sum insured or market value whichever is the lesser, or

(b) your vehicle is stolen and not recovered within a reasonable period of time.

Both (a) and (b) above will be determined by us.

(2) Your Vehicle is a total loss

Your vehicle is a total loss if it is stolen and not recovered and We agree to accept a claim for theft of Your Vehicle, or if the cost of repairs to any Vehicle exceeds its Market Value less any Salvage value of the remains and components.

(3) Total Loss means:

Total Loss means where Your Insured Item is stolen and not recovered within a reasonable period of time, or suffers loss or Damage and We consider the cost of repairing it is either unsafe or uneconomical.

You may note that (3) insurer definition does not mention Less Salvage value, however they may still use the same formula as the other insurers to calculate a Total loss.

In past years the above methods of calculating a total loss have not really been an issue as the second-hand vehicle market prices has been relatively stable and spare parts have been readily available. However, over the last couple of years we have experienced a boom in the second hand market for trucks and spare parts, which has led to the market values of trucks increase in some instances up to 30 per cent.

Examples:

Year 2019 Sum Insured $60,000 – Repair Quote $40,000 plus Salvage $15,000 = $55,000 (vehicle may be considered a repair)

Year 2021 Sum Insured $60,000 – Repair Quote $40,000 plus Salvage $25,000 = $65,000 (vehicle would be considered an Un-economical Write Off according to the above insurers definitions)

Same vehicle, same insured value, but it may be automatically be deemed an Un-economical Write Off because the insurer is able to get such a high $ amount to sell the salvage and recover a larger portion of their cost – great for them.

But the result puts the insured in a position of a greater financial loss because to replace their Written Off vehicle they will be buying into an over inflated second-hand market and will need to pay in some instances up to 25-30 per cent more for the same vehicle, which is not and should not be the intention of an insurance policy.

We are and will continue to work with the insurers on this issue in the hope that they will devise a fairer method to determine an Un-economical Write Off or Repair if under the nominated Sum Insured.

Important: All answers and information contained within this article should be considered as General Advice Only. This advice should only be considered as General in Nature and its intent is only to prompt the readers to investigate their own individual insurances. It has been prepared without taking into account the readers own individual objectives, financial situation or needs. Because of that, before acting on the above advice, the client or any persons should consider its appropriateness (having regard to their objectives, needs and financial situation) and seek further independent advice from their own financial advisor.

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