Ausure Horizon co-director David Summers warns a prolonged increase in fuel costs due to the Middle East conflict is likely to have knock-on effects across the heavy motor industry.

He spoke with insuranceNEWS.com.au for a new Q&A series designed to elevate broker perspectives on issues affecting the profession.

How are heavy motor clients faring with fuel cost increases? What sort of impact have they had on operations?

While most have so far been absorbing these costs into their day-to-day operations, the longer the situation persists, the more significant the pressure becomes. Concerns are now starting to rise, and we are seeing early signs of operational adjustments, including cost reviews and the gradual passing on of increased expenses where possible.

Has there been any issue with supply? And are there concerns around future supply?

To date, supply has remained relatively stable, with no major disruptions aside from well-documented challenges in some regional and country areas. However, operators are having to undertake more planning and preparation to manage availability.

While supply is currently holding, there is a growing sense of uncertainty about future conditions, and clients are effectively in a holding pattern, focused on maintaining operations until there is greater clarity on how the situation will evolve.

Are there knock-on effects for the industry from the increased costs, and what would it mean if these issues persisted for an extended period?

Operators with greater scale and stronger balance sheets are better positioned to absorb prolonged margin pressure, whereas smaller operators – particularly those with less flexible contract structures – may struggle to sustain ongoing losses or reduced margins. If the situation continues over an extended period, it is likely to accelerate industry consolidation, with an increased risk of mergers, acquisitions and, in some cases, business closures.

Overall, this would lead to a shift in market dynamics, where larger players gain greater market share while smaller operators face increasing pressure to remain viable.

What role have you played as a broker to assist clients with these issues? More broadly, what do you think brokers can do to help?

We are working closely with clients to explore and explain alternative policy structures beyond standard placements. This includes options such as aggregate policies and burner programs, which can provide greater flexibility and cost control depending on the client’s operating profile. We also prioritise negotiating inclusions such as CEDs within policies to help improve overall value.

More broadly, brokers can add value by taking a proactive advisory approach, helping clients understand their options, structuring programs that align with their cash flow and risk tolerance, and identifying opportunities to manage costs without compromising on essential coverage, which includes providing multiple variations to the excess structures.

What efforts are insurers and industry associations making to help with this issue? Have they put out recommendations? If so, what are they, and will they work?

At this stage, there has been limited visible or co-ordinated action from insurers or industry associations specifically addressing the impact of rising fuel costs on heavy motor operators. While some general guidance and market commentary may exist, there has not been a clear or consistent set of recommendations that has materially shifted outcomes for clients.

What is more evident is that we have entered a relatively softened insurance market, which is creating opportunities to seek alternative quotations and engage more actively with incumbent insurers.

In this environment, it is critical to test the market and negotiate firmly, as this can lead to more competitive pricing and improved terms for clients. While these market dynamics are helpful, they are not a complete solution to the broader cost pressures facing operators.

During the pandemic, some insurers allowed companies to delay their premium payments. Do you think that’s something that could work?

While it may provide short-term relief, it ultimately pushes the financial burden further down the line and can compound the problem, particularly where there is no clear end in sight to the underlying cost pressures.

In fact, moving to more frequent payment arrangements, such as weekly funding rather than monthly, can give businesses better visibility over their cash flow and a clearer understanding of their financial position. If payments are simply deferred, there is a risk that liabilities will accumulate to the point where businesses may struggle to recover, which could create broader solvency concerns across the industry.

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