Baltimore bridge collapse disrupts supply chain, potential insurance impact
Will the supply chain disruption drive up new and used vehicle costs as well as auto part prices?
When the container vessel M/V Dali slammed into Baltimore’s Francis Scott Key Bridge, it collapsed not only critical infrastructure but also a key point in the U.S. auto supply chain.
It is too early to determine the full impact of the accident, but past snarls in the auto supply network have proven to have a downstream impact on auto insurance, according to Joel Pepera, director of telematics at Arity.
The Detroit Regional Chamber reported the Baltimore port is “number one automotive” port in the U.S. and handled more than 750,000 vehicles in 2022. The regional chamber of commerce discussed alternative routes with major automakers and many manufacturers said they are prepared to manage this disruption.
Ford Motor Co. CFO John Lawler told Detroit media that the pandemic has helped the automaker better handle situations like this.
“We have experience now in understanding supply chain disruptions. So, we’ll just put that experience to work and figure out the best solution,” Lawler said.
However, the Detroit Regional Chamber noted that these are initial assessments and the longer term consequences are unknown.
“Specifically, OEMs are still working to better understand what parts and components may be affected across various tiers of the supply chain,” the regional chamber noted in a release.
“If it’s anything like what we saw during the pandemic, constraints in supply of vehicles can have a number of downstream consequences, which potentially might raise the price of insurance in the long term,” Pepera said.
Insurance implications
During the pandemic, demand for new vehicles outpaced supply and prices grew. In turn, prices for used cars increased as more buyers turned to preowned cars and trucks to meet their needs. This made it more expensive for insurance carriers handling total-loss auto insurance claims.
The incident could also affect the availability and cost of auto parts, while delays in transporting parts could lead to production delays and longer repair times for damaged vehicles. Higher costs for auto parts also could result in increased insurance claim payouts and premiums.
Further, rerouting vehicles to alternative ports may lead to delays and increased transportation costs, impacting production schedules and inventory management. This disruption could result in higher insurance costs due to delays in vehicle delivery and increased demand for rental vehicles during repair periods.
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