The collision repair industry has experienced a great deal of change over the last several years. The recession helped drive already flat-to-declining vehicle accident frequency down further, and more customers were opting not to have minor damage repaired. And with the average age of vehicles on the road in the U.S. at an all-time high, more vehicles were damaged total loss versus repairable. As we move into 2014 however, it would appear that the collision repair industry is beginning to see a light at the end of the tunnel.
New light-vehicle sales in 2013 hit 15.6 million, up nearly eight percent from 2012, and the fourth straight year of one million or more unit sales gain.1 New vehicle sales typically drive up auto premiums, and improving employment rates often suggest a return to driving during peak times when accident rates are highest.2 Early December snow and ice storms across broad swathes of the U.S. led to higher repair volumes to wrap up the year, with many carriers’ claims counts up nearly 15 percent from the same period in 2012. According to Aon Benfield, a mixture of heavy snow, accumulating ice, sleet, freezing rain, and rain led to dangerous driving conditions from California to Maine, resulting in thousands of structural and auto claims.3
Longer term it is unlikely the industry will see dramatic increase in repairs – claim frequency for collision and liability losses remains stable, with moderate oscillation quarter to quarter.4
The longer term trends that have led to lower accident rates overall are still in play: drivers moving into safer driving years5; high unemployment rates among Millenialls6; overall fewer miles driven per household, per vehicle, and per driver7; and more vehicles with electronic stability control and crash avoidance technologies8. Because the collision repair industry has seen a decline in the number of U.S. shops, sales per shop may still benefit. According to data from the Automotive Aftermarket Industry Association, the number of U.S. shops specializing in collision repair in the U.S. has declined nearly every year between 2002 and 2011, with the largest drop occurring in 2010, and the final tally as of 2012 at just over 34,000 independent collision repair shops.9 A review of the annual statistics reported by ASA’s How’s Your Business – Collision suggests that repairers have seen a gradual increase in the number of estimates generated per month since the heart of the recession as of the 2012 edition.10
The ASA How’s Your Business – Collision surveys also track the percent of repairers that participate in insurance company direct repair programs (DRP). Since 2001 the percentage reported by the survey has remained fairly steady at about 90 percent.11 The 2012 ASA survey reported that only 7.7 percent of repairers responded “None” to the question “In how many DRPs do you currently participate.”12Analysis of repairable appraisal count for insurance companies within the top 25 personal lines auto insurers points to increased use of DRP across the industry, with DRP share of volume trending at just over 40 percent by 2013 year-end.
Automakers today must meet the growing demands of consumers as well as U.S. regulatory demand for safety features such as electronic stability control (required on all vehicles in the U.S. by the 2012 model year), doubled roof strength standards for light vehicles by the 2017 model year; and, higher standards for fuel economy and emissions by the 2016 model year. Each of these changes will impact the electronics and materials used in the composition of vehicles in the coming years. Many of these changes to vehicles have the potential to reduce frequency, yet add complexity in material and electronics that may raise the cost to repair a vehicle in the future.
As the complexity of vehicles increases, repairers must have the capital necessary to support the significant investment in the training and special tools required to repair these vehicles. The use of multiple material types can add a great deal of complexity and potentially cost to the repair, and perhaps the most significant challenge lies not in the use of a single substrate such as aluminum, but rather numerous substrates in a single vehicle. The use of a broader range of materials requires new joining techniques, methodologies and machine parameters to reinstate reliable repair joints and ultimately restore the integrity of the pre-accident vehicle structure13.
Repairers will need to focus on improving production models and potentially increasing scale to afford greater purchasing power, flexibility and the ability to handle new complex repairs. Repairers must keep pace with the variety of new materials and technologies gradually being incorporated into the vehicles on the road today. Tools such as integrated repair method data and the training and certification programs provided by numerous OE’s will help repairers.
Technology drives transformation
As repairers of all sizes have adopted technology that streamlines the appraisal and repair processes, the industry has benefited from an improvement in cycle time. As repairers and insurers jointly manage cycle time from the date the loss is initially reported, through appraisal and vehicle drop-off, to ultimately vehicle pickup, the industry benefits from better productivity and customer satisfaction. Measuring the overall number of days for the vehicle repair and the overall number of days the vehicle is in the shop by total labor hours enables repairers and insurers to understand opportunities to reduce down-time where the vehicle owner is waiting for his or her vehicle to be returned.
Advancements in insurance and collision repair technologies have been instrumental in restructuring the way auto claims are handled. Electronic appraisal reviews and shared guidelines provide business partners have the information needed to fulfill work in a transparent, compliant, and efficient manner. Management dashboards facilitate claims performance review in a concise, targeted manner, enabling managers to address specific areas of performance, adjust levers, and evaluate the impact in real time. And when pre-fill and predictive analytics are incorporated into the overall process, unnecessary steps can be avoided at FNOL and at other points in the claims process so that the proper resources are not only assigned, but are equipped with information for quick and satisfactory claim settlement.
The collision repair industry too has benefited from greater use of technology – whether through the ability to update the vehicle owner automatically of the status of a repair, or through the ability to automatically update the repair production stages via an iPhone® device or Android™ device. These changes have shaved time off of the claim and repair process and have worked to streamline communication between the parties.
Repairers that want to succeed in the future will find the necessary balance of their ability to repair increasingly complex vehicles, and their ability to deliver high levels of productivity and customer satisfaction. Technology will play a key role in achieving that balance – where the shop manager, estimator, technician, and front office personnel will be equipped with tools that provide them with the information at the right time, on the right device. Knowing how to use technology to cater the claims and vehicle repair experience to each customer will enable repairers and insurers to reach higher levels of customer satisfaction, retention and growth. With the right business processes, information, and systems, businesses can respond to these expectations and deliver an experience to their customers that they will want to share with friends and family.