October 2019

NEWS One of the more serious implications of Brexit for the automotive sector may be the imposition of tariffs on car parts. Much of the attention has been focused on car manufacturers based in the UK because they are particularly exposed. Despite this, the garage sector and crash repairers would also see costs rise if tariffs were imposed on parts. As Aftermarket’s October issue went to press, the current leave date for the UK was still 31 October, as it had been for some months. However, there are concerns that the potential tariff impact on car parts prices may already have been used as an excuse to justify insurance premium price rises by car insurers. A reader contacted Aftermarket to tell his story: “Car insurance on my Mini was up for renewal in August. I had been sent a quote by my insurer, which is Allianz. Speaking to their member of staff, I was given a list of reasons as to why my insurance was so much higher this year. At first, they were all the kind of things you would expect, but then he started talking about one of the causes being the rising cost of car parts resulting from increased tariffs. I said ‘excuse me it’s a Mini, a European car, built in the UK. The vast majority of parts are European, made by European companies. Brexit hasn’t happened yet so there are no tariffs on parts’. I am a bit concerned that this may be something they are telling customers generally.” We contacted Allianz for comment. When asked if Allianz had changed its pricing to pre-empt a no deal Brexit, a spokesperson for the company said: “Allianz has not made changes to pricing specifically related to any potential future changes to tariffs on car parts, or other factors related to possible post-Brexit trade deals, or the lack thereof.” When asked if customers are routinely told that tariffs on parts are causing repair costs to rise, the company’s spokesperson said: “This is not something which agents are trained on or routinely relay to clients as a rationale for price increase.” The spokesperson added: “Unknown variables related to the specific possible outcomes of potential post-Brexit trade deals are not being used to price our remaining personal lines motor insurance products. Our pricing in common with any insurer, does require us to take a view of the level of inflation we would expect over the next year, since policies are issued for 12 months. A wide range of factors make up how premiums are calculated including customer risk profiles, changes to legal reforms and regulations, claims inflation, fraud and theft.” Factors Some insurers are taking Brexit seriously. In its interim results for 2019 released in August, Admiral Group highlighted the risks the possibility of a no deal Brexit posed, including “The potential for market volatility, and the potential for the uncertainty or the emerging terms of exit to trigger or exacerbate less favourable economic conditions in the UK and other countries in which Admiral operates.” The results revealed that as part of its own risk and solvency assessment (ORSA) process, Admiral has run Brexit stress testing exercises. As part of the process, Admiral has set up a working group to manage and mitigate the possible effect of a no deal Brexit on car parts imports, and the resulting impact on claims costs. The report added: “The Group recognises the potential economic disruption that may arise from a ‘no deal’ Brexit. Whilst the Group is comfortable that it is able to manage potential outcomes following the review of the stress testing noted above, it recognises the uncertainties that exist in relation to Brexit.” Commenting on the issue, a spokesperson for the Association of British Insurers (ABI) observed: “Car part and new vehicle tariffs etc remain a political uncertainty at the moment. Of course, it’s worth noting that insurers take hundreds of factors into account when pricing a premium and tariffs would only be one of a plethora. “Things that are currently a certainty, because of Brexit, are the huge drop in the value of the pound since the referendum, which will inevitably increase the cost of imported parts significantly and inflate claims costs more generally.” “Costs for motor insurers are increasing for a wide variety of reasons at the moment., Our current figures show that the repair bill for insurers in the first quarter of this year was £1.2 billion, the highest quarterly figure since the ABI started collecting this data back in 2013. There’s also then the ongoing issue of the Discount Rate, but that’s of course nothing to do with Brexit.” The ABI’s spokesperson added: “In a time of increased uncertainty cause by Brexit, consumers are likely to need to shop around in order to find the most suitable policy for them, at the right price.” 4 AFTERMARKET OCTOBER 2019 www.aftermarketonline.net Brexit: Insurers fuelling car parts tariff fears?