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 14

  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. 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 utilise calculate values based on market data, but I would agree yes they have taken too long to catch up – it’s not perfect I agree. 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 so 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. 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

  3. 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

  4. 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!

  5. 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

  6. 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

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