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During the COVID pandemic increased government spending saw a boom in construction projections, with the crane sector stretched to its limits meeting the increased demand. The pandemic had a significant global impact on the availability of components, and this is still being felt today. Lead times for new equipment from OEMs are up to 24 to 36 months which has led to crane hire businesses examining the benefits of purchasing quality used equipment.
With long lead times on new equipment, the industry has been forced to hold onto some of its older equipment, and this was particularly the case during the COVID-19 period where supply could not meet demand, and the Government spending led to a significant upturn in the construction industry.
UAA customers had no option but to hold onto their equipment and/or purchase more secondhand equipment. In today’s business environment, including the recent downturn in the construction sector, and with supply gradually catching up to demand, there appears to be greater opportunities for customers to focus on their businesses, purchase new models and start selling off older equipment.
This environment certainly puts customers in good stead for the next upturn and with new equipment comes new opportunities. New equipment greatly reduces the amount of time and resources it takes to service and maintain older machines. New machines create greater opportunities for operators to learn new systems and new technologies which lead to increased productivity, greater efficiencies and safer work environments.
But what are the insurance implications for a crane hire business trading in older equipment for new models? What do cranes owners need to be aware of when it comes to ensuring they have the right levels of insurance for both the new and used equipment in their fleets? Stan has some advice.
“As customers renew their fleets, by purchasing newer equipment or trading in older machines for newer models, they need to be diligent in ensuring their asset schedules are accurate in terms of assets being put on or assets being removed,” said Stan.
“Sometimes insurance could be the last thing on people’s minds. They’re mainly focused on the new asset and how it’s going to benefit the business, and we often see delays in terms of informing the insurance company that they have an old machine that’s now come off the policy and a new one that needs to come on. This lack of diligence can certainly impact on insurance costs because you could have assets that you no longer own on the schedule and not have the appropriate asset actually covered,” said Stan.
Another key aspect, particularly with older machines on schedules, is to ensure the market value is correct. Crane hire businesses don’t want to be overstating the market value on the sum insured and they certainly don’t want to underestimate, with both scenarios having implications.
If it’s overestimated, the implication is greater premiums are allocated to the cover the value provided. Under insurance has implications when there is a loss, where a under insurance clause could be triggered which may reduce the indemnity provided by the insurer.
UAA’s advice when insuring used equipment is as follows.
What do crane hire businesses need to be aware of in terms of insuring used cranes?
• Certification to Australian standards
• Maintenance and servicing having been completed throughout the life of the crane (and provided to the purchaser)
• Monitoring systems are in working order (limiters, load measurement, wind speed etc)
• Operators having appropriate licences/ experience (not specific to used cranes, more if it is different from existing fleet)
• Caution on any previous damage / repairs
What documentation and paperwork does UAA require to ensure the used crane is fit to be insured and for the right value?
• UAA doesn’t require documentation however the policies response could be impacted if the purchaser failed to exercise due diligence.
• Value is nominated and should reflect current market value with consideration for age, make, capacity, hours, any permanent attachments or modifications made to the machine.
Another issue to consider is the current value of used equipment. The industry is seeing a downturn in the value of secondhand equipment, certainly when compared to prices during the COVID-19 pandemic when values increased considerably.
“During COVID we were informing customers to ensure the sum insured represented the true market value of the machines at that point in time. With the supply of new equipment gradually catching up with demand, we are seeing a downturn in used equipment values. So again, we are advising customers to be diligent around the sum insured to ensure they are representative of the market value,” said Stan.