Wind energy claim submissions are often submitted with just one quote for repairs. This exclusive quote typically comes from the original equipment manufacturer (OEM). In other industries, such a submission would be considered inadequate. After all, it is common practice to obtain multiple quotes to ensure the repair is charged at a fair market price.
So why is only one quote acceptable for wind? For one reason, many insureds easily assume only OEMs can provide the repair. And as such, the provision of one quote from an OEM has quickly become the norm. To debunk this myth, let’s take a step back and try to understand just how this came about.
Many OEMs are understandably reluctant to disclose detailed information about their machines and its repairs. This information is considered intellectual property, not to mention, a valuable commercial asset.
This reluctance to disclose information has resulted in the market believing that the company that manufactured the unit is best suited to repair it. The reality is, many wind energy assets are situated in remote locations worldwide and the OEM is often not best placed to rapidly repair an asset or mitigate loss. Also, OEMs frequently outsource repairs to parties who have no knowledge of the original construction. Arguably, these parties have no better knowledge to undertake the repairs than an independent third party approached directly.
Another obstacle to using third-party repairers is the fear that such use will invalidate an on-going OEM warranty. Those insured are wary of choosing other repair agents in the face of an OEM sternly citing its warranty terms – even though most OEMs provide irrelevant reasons why a third party cannot work on its units during the warranty period. There is no objective reason why a third party should not repair a turbine under an insurance claim if the work has no material effect on other parts of the asset under warranty.
This is a regular source of conflict with claims, but utility-scale project owners tend to be more successful obtaining the consent of OEMs to use third parties for repairs. This could be because the OEM is prepared to be more flexible when dealing with entities with great purchasing power. Whatever the reason, treating large and small-asset owners differently doesn’t seem altogether equitable.
Of course, the current situation is one that OEMs are happy to continue to pursue. This is particularly true because considerable margins are made on asset repairs. Other wind farm stakeholders must challenge the status quo. Otherwise, repairs frequently results in unnecessarily high costs that lead to higher future premiums.
The root cause in these cases is lack of competition. Increased competition results in lower prices, more choices, better quality, and innovation. To increase competition, more repair companies must be permitted to operate in the market. This will curb the current market power of the OEMs.More competition in the repair process will create competitive market rates for indemnification. This can lead to lower claims expenses which ultimately reduce renewal premiums. As the worldwide wind energy market comes of age, it’s time for the claims protocol and procedures to catch up. WPE