With the recent downturns in mining, upturns in construction, especially in New South Wales and Victoria, as well as the impact of the Australian dollar, it has seen a change in the market. It has become far more critical to provide updated and market- relevant Agreed Value valuations. Business owners should acquire valuations for insurance purposes on such things as mobile plants, earth moving machinery, trucks, trailers, plant and equipment.
Values are also coming under further pressure for trucks that are now ten years or older as finance companies are reluctant to provide finance.
It is critical in these shifting times for Mobile Plant and Machinery Operators not only to update their Agreed Valuations annually but also to review current agreed values to ensure appropriate insurance coverage.
New Replacement Insurance Cover versus Market Value for Mobile Plant and Machinery for Total Loss Claims
Insuring mobile plant and machinery for its market value is common practice in Australia. However, it can also be considerable cause of frustration and conflict in the event of an insurance claim in establishing a fair and reasonable settlement.
Mobile plant covers a broad field of equipment designed for specialised industries including mining, construction, waste and transport infrastructure. Due to the fluctuating fortunes of these sectors, economic conditions play a large part in determining the demand and supply of the equipment – and, in turn, its value.
As an example, the downturn in mining exploration has led to more drilling rigs being available for sale in a market where explorations are fewer in number. The result is lower-cost equipment. This is good news if you are seeking to buy equipment for expansion, but not necessarily good if you are attempting to replace it following an insurance claim .
Conversely, the construction industry is in a growth phase, and where there is demand for equipment, its value is more likely to hold.
What all this means for used mobile plant and machinery is that market values can vary significantly – sometimes between 10-20%, depending on the age and condition of equipment. And when it comes to insurance, this variance in the value of equipment can amount to a significant shortfall in claims settlement if the insurer and the policyholder have divergent views on the item’s value.
What’s the best option for your business?
So, when it comes to replacing damaged equipment, are there better ways of insuring? There are certainly a number of options to consider.
The Australian insurance market has become quite sophisticated in recent years with specialised mobile plant and machinery insurers offering replacement cover on new unit for equipment that has been subject to a total loss.
The arrival of market value plus 10% or 15% for older equipment goes someway to bridging any potential short fall in claims settlement. There is also extended cover lease value pay-out and financial protection when equipment is subject to finance. Some Australian-based insurers offer agreed value terms, provided formal valuations are obtained annually at the client’s cost.
Agreed value is a sum insured that has been fixed after an agreement between the insurer and the policyholder. It may be significantly different from the market value.
At Emjay Insurance Brokers, our considerable experience in the mining, construction and transportation industry sectors has enabled us to use our market leverage to develop tailored insurance products for our client’s mobile plant and machinery fleets. Our ‘best practice’ recommendation for our client’s is to insure on either on a ‘Replacement Value’ or Agreed Value’ basis in order to provide certainty of settlement when making an insurance claim. Emjay ‘s preferred Underwriters are supportive of this approach particularly where operators are also able to demonstrate that fleets are well maintained through robust service programs and safe work practices.