Many Australian businesses, of any size, are not considering the impact of the declining Australian Dollar (AUD) on the values of their major plant and equipment, particularly when it comes to assessing another year’s sums insured.
In 2012, 1 USD = 1.03 AUD. Now, in August 2016, 1 USD = 0.75 AUD.
Due to the AUD gradually declining, the cost to replace imported assets has increased dramatically. For example, a printing press we valued in 2012 had a new cost of $7,500,000 compared to today where it's in the vicinity of $10,500,000.
The replacement cost of imported assets, their maintenance and spare parts will increase as well as their value. Most businesses have imported assets of some variety and therefore shouldn't think themselves exempt of this issue. No machine is fire resistant or indestructible.
Businesses that haven’t considered their imported assets insurance values could be well under the expected replacement cost and could therefore be in for a real shock.
It’s also dangerous territory for any business that guess their plant values or adopts an annual CPI increase when updating their sums insured each year. What is the point of clients having and paying for insurance coverage if it's not going to compensate them the way you would expect it to?
Clients worry about disaster hitting their buildings but not what's inside them and consider it appropriate to have their buildings insured, whilst not placing the same importance on their plant and equipment.
All businesses no matter their size require current asset registers and insurance valuations to support any potential claim. It does not matter how new or old the assets may be at the time of loss, they will all need to be replaced.
Why 'buy' protection if it's not 'enough' protection. There's no benefit being partially protected. Another reason why it’s important for your clients to have up to date insurance valuations.