Brexit considerations for fleet managers
IF you thought you had heard enough about Brexit in 2016 and 2017 you may not enjoy 2018 too much!
Despite the endless analysis, though, one issue which hasn't received much attention is the potential impact of Brexit on the cost of vehicle repairs and, consequently, insurance. In the eventuality of no agreement on a UK / EU free trade deal, costs in both these areas may rise.
Vehicle repair costs are already on an upward trajectory. Modern vehicles are incredibly sophisticated, jam-packed with technological wonders which have improved safety and efficiency. That is welcome, but the downside is that costs have risen considerably, up by 33 per cent for accidental damage in the past four years. This is partly labour, but it's also the cost of parts.
Not that long ago the cost for repairing headlamp damage caused by a low-speed collision was around £100 to £200. Now, with the advent of LED and laser lights, it could be an eye-watering £2,000 once the additional time taken to recalibrate them is included.
The nostalgic days of the sole trader mechanic who could tinker in his shed are sadly coming to an end. Sophisticated diagnostic computers are becoming the norm for most garages and costs will continue to track upwards.
Last autumn the Association of British Insurers (ABI) gave evidence to the Business, Energy and Industrial Strategy Committee at Westminster, detailing how Brexit could add to these technological expenses.
Evidently, the car manufacturing sector in the UK is deeply inter-connected with the EU market. In 2015, 57.5 per cent of cars exported from the UK in 2015 went to the EU, while 81.8 per cent of cars imported into the UK come from the EU. The EU supply chain is also critical, especially given that the industry has built itself upon lean and just-in-time procedures which are dependent upon smooth logistics. The prospect of costly border delays could undermine the sector's competiveness.
What really unnerves the industry though is the prospect of a ‘no deal' arrangement with the EU and a fall-back position to World Trade Organisation (WTO) rules. This would mean a 4.5 per cent tariff on components which would have a direct impact upon repair costs.
The ABI also makes the point that sterling's depreciation has impacted upon the costs of the vehicle parts supply chain. That affects the costs of replacement parts and, therefore, the settling of insurance claims.
The take home point from the briefing was that “Increased costs, even for relatively minor incidents – can have a direct impact on the premiums insurers charge.”
For fleet managers, however, there are options to reduce costs. Telematics and a thorough understanding of how your fleet operates is a good place to start. For instance, if your fleet spends a disproportionate amount of time stuck in traffic, stop-start technology might be more efficient. Or what about servicing at the weekend? It might be more expensive, but those costs could be recouped from a smoother flowing working week. Your Insurance broker will also be on hand to review your requirements.
With the details of Brexit still to be agreed, uncertainty will continue. The onus is on fleet managers to plan for a rising cost environment and identify savings wherever they can.
:: Diane Johnston is head of SME at Autoline Insurance Group (www.autoline.co.uk/business)