Off road vehicle in front of coloured sands on Fraser Island, Queensland, Australia

Vehicle Values – Bubble or “New Normal”?

So it’s no surprise that vehicle values are a hot topic at the moment. Anyone who has the same couch-based penchant for surfing car sales sites that I do, knows that COVID has been good for people wanting to sell cars, not so much to buy. In a discussion with a mate who sells high-end prestige and classic vehicles was enlightening – at the height of covid the number of vehicles available for sale on the leading car sales site was half the pre-covid number; it remains pretty much the same today. Supply has been a real issue with the used vehicle market, with less people looking to renew leases or trade a vehicle based on challenged consumer confidence. On the new car end, we have supply challenges with both manufacturing and shipping delays. These issues are now compounded by the Semi-conductor issue, with thousands of vehicles sitting incapacitated – awaiting these critical parts to be able to operate and be delivered. Even some of the most anticipated new vehicles like the 300 are experiencing continued changes and they’ve even stopped taking pre-orders.

So what does this mean to all of us? Well, the old chestnut about people buying 200’s over the last 12 months is a good example. Yes, the 200 is one of the most revered and all-round capable 4×4’s available and they command and have commanded a premium on the second-hand market, even before COVID. This particular model has also experienced a boom based on those who prefer an extra cylinder or two, with droves running to buy up the final brand new examples available. This has now also pushed into the second-hand market – if you can’t get a new one, buy a second-hand one right? This has all resulted in the market value of these vehicles increasing significantly.

In general, it’s a common calamity across all makes and models, this lack of supply has created a bubble in values which means getting your sum insured correct on your insurance policy is all the more important. Of note also, the same sort of supply challenge has been evident with the parts we also love to adorn our fourby’s with, so don’t forget about ensuring that your policy covers the value of all the bells and whistles you have attached along the way. If your total sum insured doesn’t reflect what it would cost you to replace the entire setup, then you could be underinsured where you don’t have to be.

But I’ve just got my renewal and the value has gone down – surely these guys don’t think this is right?

Over the last few months, I’ve seen commentary from people taking offence to the fact that the Agreed Value that was set at the beginning of the policy has changed, so I’d like to clarify things.

An Agreed Value is set for the term of insurance; usually 12 months, and only if you chose to take out an Agreed Value policy as opposed to Market Value. Simplistically, you agree the value with your insurer or insurance agent for the term that you agree to take out an insurance policy. During that period, having an Agreed Value for your vehicle can give you certainty around what you would get paid if the worst were to happen and your vehicle would get deemed a total loss. When you select Market Value, should the worst happen the value is determined at the time of the claim.

Regardless of which option you take, there is depreciation applied, year on year – this is driven by the data house that is utilised, in our case Glasses Guide, who take a market view on what a vehicle is worth and provide guiding ranges for Agreed Values and help in the process of determining Market Value at the time of a claim. But you’re not limited to this – we get calls every single day to this effect and we are happy to take a bespoke approach to valuation – if you feel it’s not fair, as I’ve detailed in this blog I wrote a while back, give us a call and we’ll happily take a look.

Finally, the modifications and accessories – as you all know we do things a little differently to the rest of the market and a key benefit to taking a Club 4X4 Policy is that we insure the value of the mods as part of your Total Sum Insured. The intent is always to get you back to the position you were in before an accident, so you must ask yourself if your total sum insured is enough to do that.

I wonder how long this bubble will last? Any thoughts?

And if you’ve got ideas on how we can do thing better, we always welcome your feedback!

Happy Touring

Kalen

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Comments 29

  1. Sorry Kalen, but I think you fail to address the issue you have raised. When market values of vehicles fall with age then it is reasonable that agreed value drops annually, but when market values increase there really should be no reason at all to depreciate an agreed value. If you think otherwise then you should explain why you think this. What you have posted fails to do this, & the ‘get out clause’ of ‘happy to take a bespoke approach to valuation’ – meaning a potentially annual hassle of onus of proof (photos etc) being placed upon the vehicle owner for a vehicle already ‘known’ to the insurer is weak. And clearly Glasses Guide & the like is unable to keep up with what everyone can see in the marketplace. Your article recognises the market place reality but then falls back onto Glasses Guide which doesn’t. This continues to shout “unfair, especially when depreciated agreed values are inevitably accompanied by increased premiums.

    1. My thoughts exactly ,typical insurance speak , very vague until you make a claim I’ve just gone through this with my insurer as to the market value increases on all if not most makes and models even though mine is agreed value they refused to increase the agreed value in line with what the market is asking , they say I’m over valuing my vehicle but when you look at asking AND selling prices I’m right in the middle so I am changing insurers

      1. Hi Ron,

        Assuming your situation was not with us?

        What can I do to make things clearer for you – please ask the questions and i’ll will keep going until everyone is comfortable!

        Kalen

    2. Hi Ian,

      Valid point and happy to take your feedback and thoughts – my intent was not to shy away from the issue.

      Let me try to explain my thoughts in more detail:

      1) Valuation Data – We, like most insurers or insurance agents, rely on a data set to value a vehicle. In our case we rely on Glasses Guide. These data sources calculate values based on market data, but I would agree yes they have taken too long to catch up – it’s not perfect. We have seen over the last few months more accurate data coming through which is promising.
      2) The correlation with premium – I’d like to note that the assertion of premiums increasing as inevitable is not that simple to make. We have a proportion of customers who see no increases and some that will see decreases (believe it or not – no one actually talks about it!), along with those who do see increases throughout the years. Vehicle value is not the only determinant in that process though – we have an underwriting process consistent of a broad range of criteria and they are continually monitored based on how the individual policyholder and the portfolio is performing. You are right however that where you want to increase the value of a vehicle, the premium will increase proportionately.
      3) Regarding the process of providing a “showcase” of the vehicle for re-valuation, this process is only required where a customer wants to exceed the maximum vehicle value allowable on Glasses Guide. Yes, it’s a hurdle, but for us it’s a process we need to undertake to ensure comfort to allow the higher value. Ultimately it’s a way to better service our customers requirements.

      Hope that’s clearer Ian

      Kalen

  2. This is a brave topic to cover in your newsletter considering the lack of ability, desire or both that Club 4X4 have in dealing with it. I have recently been through this with Club 4X4 when renewing the insurance on my 200 Series. Armed with proof from every car sales site available, your underwriters were unwilling to increase the Agreed Value for my vehicle to a price that would allow me to replace it should the worst happen.

    “Club 4X4 has forced me into under insuring” – now there’s a snappy newsletter heading

    1. Scott,

      I am happy to deal with you directly here. What you’re suggesting doesn’t line up with how I want things done in the business and id really appreciate as a minimum your policy number so that I can look into it.

      Please respond here and ill work on it myself

      Kalen

  3. Hi Kalen, I think you should be clear about the process of disputing the agreed valuation. Comments like “we are happy to take a bespoke approach to valuation – if you feel it’s not fair” are a bit folksy. You were much more upfront in the blog article you wrote.

    I have a 2005 Landcruiser 100 Series, HDJ100R GXL, with 142,000 km on the clock. My Club 4×4 renewal valued the base vehicle at $31,000. I was shocked. Show me where you could buy 2005 Landcruiser 100 Series at that price that wasn’t a heap of junk.

    So it did a search of car sales for comparable models and came up with 12 from around the country, both dealer and private, and the average value was $39,725. The minimum km traveled for this group was 264,848 km. I sent this off to Club 4×4 and got the following as a response.

    “You can increased your agreed value on your vehicle at any stage. If you wish to go above the range we have ( we use glasses guide) we require a showcase of photos of the vehicle and a list of modifications and accessories and our underwriters can review this to provide a new agreed value and premium.”

    In other words you virtually have to re-apply for the insurance.

    I agree with all the others that have suggested the Glasses Guide is for dealers and it is far from up to date. Maybe you can provide some data on a model that they have used to come up with a valuation.

    We all insure vehicles with the view that we would like to fund a replacement if the worst happens. While Club 4×4 is very good at covering modifications and accessories it has become increasingly lacking on the value of the base vehicle. Whether this is a bubble or not is far from relevant. It is the value now. Insurance is only for 12 months and the value can be moved up or down as the market changes.

    1. G’day Wayne,

      Thanks for that and happy to make the process crystal clear so thanks for asking.

      To confirm, where a customer wants a value above the max allowable by our data guide, we go through a valuation process. This does include a “showcase” of the vehicle – a corny term that I actually coined many years ago.

      The showcase is designed to give the underwriter, which at times can be me personally, to get a view of the vehicle. My ideal world is to see the car, poke around it, check the mileage, look underneath, check the bay – all the things one would do to check and validate condition when valuing a vehicle. A face to face isn’t possible as we insure cars right around the country, so a photo showcase is what’s required.

      Those photos get uploaded and get across the desk of someone authorised to do it. If it’s me – I use a combination of methods to come to a fair valuation of the vehicle in question.

      1) I check the photos and consider the mileage of the vehicle, general condition and if it all lines up
      2) I then apply my lense – I see a few of these and spend too much time on carsales and talk to a lot of different people in the industry – you just get a sense of where things are at in the market
      3) I, like you, would go to different websites where vehicles are sold and check what people are asking. I do this however with the understanding that asking is not what cars sell for. I’ve done my share of buying and selling in my time – i’ve never been lucky enough to date to sell for what I ask for to the dollar. So I apply a bit of reasonability to that
      4) I apply my valuation and one of the team then call the customer to provide the outcome.

      I trust this helps – if not please continue to question

      Kalen

  4. I concur with Ian. I recently sought a quote from yourselves and your system dictated a replacement value far lower than any equivalent car available for purchase. When I tried to circumvent this by creating an appropriate value, I was told that I would have to provide details of all the ‘accessories’ contributing to the higher amount – I could not be bothered to argue about what is a fair replacement value in the current market and just went elsewhere.
    I imagine that most people take out insurance in the hope that they never have to make a claim, but when they do they want to be fairly compensated – telling them you will pay out $30k on a car that can’t be replaced for less than $50k is not fair – getting the customer to justify the difference is also not fair. If you have been experiencing customers ‘taking offense’ at your validations, can I suggest you revisit your systems and procedures rather than wait for a call and then ‘take a look’.

    1. Hi Steven,

      Ill try to address all of your points here.

      1) The notion of “taking offense” was moreso the view that people seem to have around an Agreed Value not continuing post the insurance term – not so much the values. I can say with confidence that where a customer has called us to query and get a bespoke valuation the overwhelming majority will walk away happy. I have regular involvement in many of the more significant re-valuations that go above the Glasses Guide ceiling. I combine my personal knowledge of what’s going on in the market as well as occasional peaks at car sales sites to determine the best outcome.
      2) It sounds to me like the issue you had was whilst using our website and i will take your feedback there. The process of determining a complete and total sum insured for our product has two components – vehicle value, then modifications. It sounds to me like you simply weren’t happy with the former. I’m sorry it wasn’t clear to you. I am always more than happy to work directly with customers to get the best outcome, let me know if you’re interested.

      Kalen

  5. I agree with Ian
    IF you take out an agreed value policy then that value should carry over from year to year, if some sort of verification is require from time to time to prove its condition, then so be it.
    It is should ultimately be up to the owner to decide weather or not they want to change that agreed value , not some out of date guide that does not reflect the market reality .
    under the current formula am i to assume that when my policy is due on my 200 series the market value will have decreased ? when in fact it is probably worth more now than it was 12 months ago You say you get calls about this every day, so why not save yourself some time and just value the cars correctly in the first place .

    1. Hi Wayne,

      As a long time car guy, i’d love for the value I agree my car to be at today to be the same in 10 years time – believe me.

      As a car guy also, i’ve not ever found an insurer or an insurance product where that can happen.

      I find myself calling every year to up the various values with the different insurers i’m with – sometimes they do it over the phone, sometimes they want to see the vehicle. There is always a premium difference, but I find that to be a small impost. It’s piece of mind as I don’t treat any of my cars like the average Joe would – and it sounds like you’re the same.

      Kalen

  6. Sorry to hear you’re leaving Kalen.
    You asked if we have got any ideas on ‘how you can do things better’ and I can think of one right off the bat, and it’s the reason I have not insured with you.

    If I (or others) should be unfortunate enough to suffer a major issue while doing, for example, a Simpson Desert crossing or Canning Stock Route trek, you expect me/us to pay for any recovery costs in advance and then look to reimbursing me/us down the track.
    A lot of us are not rolling in money and consequently are NOT in a position to outlay some of these exorbitant costs in advance, which is why we have insurance in the first place.

    Why can you not deal directly with the recovery business as pretty much any other insurance company would do and just seek any excess payment required from me/us?

    If I wasn’t expected to put my hand in my own pocket to outlay what could be a substantial amount of dollars .. I would insure with your company in a heartbeat!!

    1. Hi David,

      This is one that we’ve tossed around for some time and are getting closer to a resolution on – I wont say when, but it’s not something we have ignored.

      In the meantime though – what you’re suggesting is that you’d rather not have the coverage than to try and find a way to pay up-front? I am not aware of any other product that offers this, additional benefit – so at the moment you would have to pay if that sort of problem were to arise in your travels anyway.

      Might be worth looking at from a different perspective.

      Thanks for the feedback

      Kal

  7. we had a royal commission into the banks that exposed the roots these big institutions impose on the unsuspecting. nows the time to have a look at the insurance industry, when insuring your home you will be severely penalised for under insuring whilst the insurer offers no help in determining the value you should insure for. this industry is full of get out clauses and fairness rates a very poor second, agreed and market values being a case in point.

    1. Hi Mark,

      I’m not exactly sure what you’re alluding too regarding “get out” clauses, but happy to talk it through here.

      The recent royal commission has had a massive and in my opinion, welcome effect on all insurance related businesses, including our own. In my 20 or so years in the industry i’ve never seen such broad sweeping changes.

      Happy to chat more

      Kal

  8. The bubble will remain until such time that everyone can confidentially resume travel beyond their home paddock-I expect there will be some vehicle and trailer bargains on offer shortly thereafter!

  9. An Agreed Value is set for the term of insurance; usually 12 months, and only if you chose to take out an Agreed Value policy as opposed to Market Value. Simplistically, you agree the value with your insurer or insurance agent for the term that you agree to take out an insurance policy. During that period, having an Agreed Value for your vehicle can give you certainty around what you would get paid if the worst were to happen and your vehicle would get deemed a total loss. When you select Market Value, should the worst happen the value is determined at the time of the claim.

    I was totally unaware of this and have just noticed over several renewals that I have been changed to Market Value. Did I miss an item in the renewal notice stating this when the renewals needed no other attention to change on my part and you just did an auto renewal leaving my vehicle way undervalued especially as I have put on only paltry kms. in the last two years by govt. (VIC) decree.

    1. Clive,

      I am glad that this article enlightened you – it was speaking to people who thought the way you did that drove me to write this piece. This isn’t something special to Club 4X4 – that notion around Agreed Value’s is exactly the same for any other motor insurance product in the industry.

      Not sure if you’re insured with us or not, but looking at your renewal I would say is absolutely paramount. An Insurance contract is just that – a contract that you’re agreed to be bound by. I certainly look through every renewal for insurance I get for things that may have changed throughout the year and ensure i inform the company and usually, look for an increase in the vehicle value.

      Kal

      1. Hi Kalen,

        I would have thought that if a person takes out an ‘Agreed Value’ policy it would be fairly safe to assume that when the policy is to be renewed, it would be renewed on the same basis unless otherwise advised.
        It seems to me to be a ‘sneaky’ way of reducing the value of a policy in the hope that the customer doesn’t notice the change. I’ve done it myself and not realised for a couple of years that I didn’t have the coverage I thought I had.

        1. Hi David,

          Thanks for the comment. One of the main reasons for this blog was to alert people to the fact that an insurance term is just that – a term where a contract exists which is usually 12 months.

          At the end of that contract term, a myriad of changes can happen, including insured values. Many insurers, us as an agent included, include a letter with renewal invitations which alert the reader to the fact that they should read the proposal as well as the PDS to ensure that the cover continues to be right for their circumstances.

          It’s important to read the documentation and make a decision on whether the product continues to suit your needs!

          Kalen

  10. I was happy enough to insure with Club4x4 this time around for my 4wd, and attempted to insure our MDC caravan as well……. What on earth was the underwriter thinking when the insurance quote for the van was over twice what other insurers have quoted? This affected the amount we had to pay for the car insurance was well as I couldnt place both with the same insurer……. Surely there is no logic in place here just a grab or are you a victim of your own success?

    1. Hi Graham,

      Thanks for your comment.

      Our Caravan premiums are higher than the market because we cover a van of any size or type in the same places we cover a vehicle. Our geographic coverage is quite broad and every single one of our customer goes off-road regularly (COVID permitting!). The risk our portfolio wears is different to many other brands out there that may have a much smaller comparative representation of true off-roaders.

      The risk associated with a large caravan going up a track is large as such we do need to rate as such based on that.

      Sorry we couldn’t help you out in this instance

      Kalen

  11. Hi again Kalen,
    Thanks for the reply. Can I suggest the process for reviewing the vehicle value should be added to the FAQ. That would save us all making the same points and asking the same questions.

    I did my homework and had a look a Glasses Guide Australia’s website. They state clearly they are here to serve Dealers, Insurance Companies, Fleet Managers etc. They also state they will not provide valuations to individuals.

    Dealers have a reason to undervalue vehicles as they want to maximize profit. Insurance companies want undervalue vehicles because they want to minimize payouts. Fleet Managers want to maximize depreciation as there is a tax benefit for them. So Glasses Guide exists to serve a particular segment not to provide accurate and fair market valuations.

    Also if you look at the webinars on the web site they are hopelessly Eurocentric. There is no mention of Australia, the US and the only mention of SE Asia and China is their impact on new car sales in Europe.

    When a company lacks transparency you begin to suspect their motivation.

    1. G’day Wayne,

      My pleasure and I hope that did give you what you were after.

      I have written various blogs over the years, but i’ve never really thought of an FAQ section on our website. I think that that is a great idea, particularly given our product is quite different to everything else on the market and there is still i feel, a burden on us to educate on the differences. We are working on a revised website so it might be one we look to implement at the same time.

      All of your assertions are correct around dealer, insurers and fleet managers. I’d like to think that we buck that trend with our bespoke process, we just have to get better at how we use our data for the broader valuation piece and that’s something i’ll take on the chin for improvement.

      Kal

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