We’ve all heard the news about supply chain issues. But if you haven’t, here’s a one sentence summary: it’s a mess. And that also applies to auto supply chain issues. Canadians are experiencing record-high pricing for new and used vehicles and car repairs.
So what does that mean for your insurance? Could your claim or even premium be affected?
We answer all these questions below! After reading this post, you’ll learn why the auto supply chain issues are complicated and how they can affect your car insurance and claims.
What is the supply chain problem, and why is it happening?
We’d all like to blame COVID-19 for the current supply chain problems. And while it has played a significant part, it’s not the only thing contributing to this growing issue. Here are some of the events affecting the auto supply chain:
01. The War in Ukraine
Devastating and horrific, the war in Ukraine has impacted millions of Ukrainian families. It has also contributed to the auto supply chain issues we now see. Semiconductor chips are an important component of almost all vehicles. They are necessary for the infotainment systems, as well as additional safety features.
To produce these semiconductor chips, neon gas is needed. And Ukraine produces approximately half of the world’s supply of neon gas. With the ensuing conflict, there has been a massive shortage. In turn, this impacts the auto supply chain shortage.
Additionally, Russia is one of the largest producers of palladium—the rare metal used in catalytic converters to filter chemicals emitted from your vehicle’s exhaust. With economic sanctions imposed on them, there has been far less palladium exported, meaning more supply chain issues for the automotive industry.
COVID has impacted nearly everyone for the past two years. And the aftermath of the global pandemic continues to impact our economy.
During the midst of the pandemic, borders were closed, meaning essential auto parts could not be shipped into Canada. In addition, workplaces were also shut down, and many Canadians adopted new work-from-home routines, limiting their driving time.
Coupled with the growing demand for semiconductor chips for computers, the auto supply chain has been severely affected. And it continues to impact new vehicle and parts manufacturing.
03. Labour Shortages
COVID changed the landscape of working conditions, foreign workers, and consumer behaviours. More and more Canadian consumers started shopping online during the pandemic. And this behaviour has continued, even after retail stores have opened.
So what does this mean for the automotive industry? An alarming 82% of automobile manufacturers have said they’re facing labour shortages. Unable to bring in immigrant employees during the height of the pandemic, manufacturers couldn’t fill their available labour positions.
There has also been a surge in retirement statistics amongst baby boomers, reducing an already unstable workforce. With delivery delays and part shortages, there has been lost revenue and halts in production. Manufacturers are not always able to keep up with competitive wage increases seen in other industries, further exacerbating the problem.
So how will supply chain issues affect my insurance claims?
The auto supply chain issues are cyclical in nature. With major part shortages, parts become more expensive, increasing the cost of vehicles and repairs while simultaneously increasing delays. Vehicle owners will wait longer for their repairs, driving up the need for rental vehicles. With more demand placed on rental agencies, there are fewer vehicles available for rent, which makes it harder for drivers to find transportation. This then further increases the cost of vehicles, which also creates more theft.
So there are multiple ways the auto supply chain issues can impact your insurance claims:
It’s taking longer for mechanic shops to ship in essential parts, meaning longer wait times for vehicle owners. Depending on whether your vehicle is operational or not, this could mean an extended need for a rental vehicle. With the shortages, it’s not only difficult to manage this, but insurance companies typically only have a set amount of days in which they’ll cover rental expenses.
Depending on your coverage, you could find yourself in a position where you’re paying out of pocket for a more expensive rental while your current vehicle sits in a shop, waiting for a part.
That’s why is very important to have the proper rental car cover in your insurance package. If you’re not sure what this looks like, auto insurance broker services for both personal usage and commercial usage. We’ll help you find a policy that provides the coverage you need in these difficult times.
02. Increased theft
As prices continue to sore and as parts continue to appreciate more and more value, theft also increases. This has most recently been seen in the growing number of catalytic converters thefts and stolen vehicles, which are often shipped abroad and resold for a considerable profit.
Ensuring that you have the proper vehicle theft insurance is extremely important. Contact us today, and learn how we can help you get the right auto insurance coverage. Also, to learn which vehicle models are among the most commonly stolen, check out this past post.
03. More “write offs”
When a vehicle costs more to repair than its current market value, it’s termed a write off. In this event, you’ll have to purchase a new vehicle using your insurance proceeds—the cash amount your insurance company will give you following your completed claim.
On average, an insurance company will deem a vehicle a write off if the repair costs are 70% or more than the vehicle’s worth. With increasing repair costs, this margin is becoming thinner and thinner. And with soaring vehicle prices and a lack of availability, finding suitable transportation is also challenging.
In some cases, you may be paying more for a vehicle that has less value than your written-off model.
Finding the right auto insurance for you or your business
While the auto supply chain issues continue to impact Canadians, it’s crucial that you find the right coverage. As insurance companies pay more for claims, premiums are also being affected, so that means even more costs for Canadian families that are already feeling a financial burden.
At Sadler, we’ll help you find the insurance coverage you need to get the peace of mind you need. Learn more about reporting a claim here, or contact us today, and we’ll happily answer any of your questions!