AWARE

Keoghs Insight

Author

Neil Garrett

The rising costs of repair in the claims process

AWARE26/01/2018
Credit Hire Aware 13

Neil Garrett, Head of New Business and Account Management at Audatex, provides our guest article on the increasing issue of credit repair.

With the number of drivers rising constantly across the UK, over 38 million vehicles are now taking to the nation’s roads. The inevitable increase in the likelihood of incidents this causes has led to the escalating amount of vehicles in need of repair or service. As a result, UK motorists are now spending £21.1 billion on servicing and repair each year.

The additional drive to reduce the weight of a vehicle, increase fuel efficiency, and the growing focus on occupant safety, has increased the complexity of these vehicles. This includes the introduction of elaborate Advanced Driver Assistance Systems (ADAS) and Safety Restraint Systems (SRS), improving overall safety but complicating the overall repair process.

This article explores how the increasing complexity of vehicles and the need for a right-first-time estimate can impact operations for credit hire and insurance companies. In the event of a claim, any delay - such as a vehicle needing to be reassessed - can further elongate the claims process, which can prove particularly frustrating for the insurers covering the cost of an incident, and equally frustrating for the claimant.

This only further highlights the need for bodyshops to ensure they have the correct resources and equipment in place to provide a right-first-time damage assessment, at the first time of asking. This is essential in satisfying customer expectations and helping to minimise unexpected costs and delays.

The increasing complexity of vehicles

As new vehicles become smarter and more complex, the damage from an accident, even that which appears cosmetically minor, can have further implications that are not immediately obvious. With increasingly intricate technology included, it’s more important than ever to fully understand what is fitted to the vehicle prior to repair, helping to minimise key-to-key times and overall repair costs.

Although these technologies have undoubtedly made vehicle occupants and other road users safer in the event of an accident, in a vehicle that contains tens of thousands of parts, the damage caused in an incident is potentially taking longer to diagnose and repair.

This overall length of the repair process is only set to increase. As avoidance systems become more prolific, they are increasingly being added to vehicles across the entire automotive spectrum. Although this means that the parts required to repair vehicles are becoming more common, the labour element - and therefore costs to repair damaged components in the event of an accident - are significantly increasing.

However, a larger and more varied parts list not only increases the initial outlay for bodyshops, but it exposes them to delays in receiving these components, further increasing repair and claim costs and potentially the length of time that the customer will be without their vehicle. Bodyshops are also having to rapidly expand the types of components they stock in-house; with the amount of parts continuing to rise, it is increasingly unlikely that bodyshops will always have the correct component instantly available.

A rising number of components doesn’t necessarily mean ‘traditional’ parts; vehicles which are utilising innovative drivetrains power units, such as all-electric and plug-in hybrid electric vehicles (PHEVs) actually contain fewer moving parts, but they are theoretically more complicated to repair.

However, the relative lack of adoption of these technologies has resulted in replacement part costs remaining higher for bodyshops. With newer vehicles increasingly becoming pieces of software, rather than hardware, the requirement for further diagnostic checks and resets has also increased, to ensure any software is properly returned to original manufacturer standards, protecting the occupants and pedestrians as designed in the event of any future accident scenario.

This is all having a profound effect on the overall cost of repair. A study conducted by Thatcham Research and the Association of British Insurers (ABI) revealed that average vehicle repair costs have increased by 32%, to £1,678, in the three years leading up to June 2017. This highlights the importance of right-first-time estimates and building knowledge of the technology fitted to modern vehicles, which will help to minimise the time taken to perform repairs.

The rising cost of repairs for insurers

The knock-on effect of delayed repairs by bodyshops and ultimately key-to-key times for customers, also has a significant impact on insurers. Should the insurer also be paying for an associated credit hire vehicle to be rented to the owner whilst their vehicle is being repaired, their costs will increase significantly with every day the customer’s vehicle is still in the bodyshop.

This therefore places increased pressure on bodyshops to assess the damage correctly in the first instance and subsequently repair the vehicle to the correct standards, using the correct repair methods. With the bodyshop acting as the first link in the damage assessment chain, this only places further emphasis on insurers carefully selecting a crash repair partner.

Because of the increasing complexity of vehicles and the time it takes to repair them to manufacturer standards, the average length of rental for temporary vehicles will only rise. This will inevitably lead to additional costs for insurers to claim back from their at-fault counterparts, which will only lengthen the final settlement process.

Furthermore, if the cost of the rental vehicle can not be fully recovered from the insurer of the at-fault vehicle, this could eventually reside with the recipient of the temporary vehicle to settle, especially if they are partially liable for the incident. This could further place a strain on the driver-insurer relationship, not to mention the financial and legal consequences. 

The importance of a ‘right-first-time’ estimate

For insurers, the importance of their bodyshop partners correctly submitting a right-first-time damage estimate is therefore crucial in minimising any added expense. While the first assessment of vehicle damage may be viewed as one element of the overall repair cycle it can, if executed correctly, reduce downtime, improve cycle and key-to-key times and add huge value to a bodyshop’s service.

If a damaged vehicle is accurately assessed first time, with the correct vehicle information sourced from third parties, repairers will not have to revisit the vehicle to make further evaluations, saving time and money. If a bodyshop submits an inaccurate repair estimate for approval and then has to reassess the vehicle, additional resources will be needed to re-inspect and re-authorise the estimate, with additional parts likely needing to be ordered. This will lead to further extended repair cycle times, which is likely to lead to a highly dissatisfied customer.

Subsequently, if a bodyshop orders parts using an estimate which turns out to be incorrect, the time it takes to reorder the correct parts will inevitably delay the repair cycle. Over time, this restricts the amount of work that bodyshops take on, making the need for accurate first time assessments all the more important.

These are further complicated by the rise in the variation of models and the subsequent spec offered by manufacturers. It has previously been relatively straightforward to identify this, but with nearly every model offered by carmakers having multiple trim and option levels - with many also offered in three and five-door versions - the combinations of vehicle variations are endless.

There are many industry tools that will help to correctly identify the vehicle’s trim level and fitted optional extras, using the vehicle’s registration or VIN number, which should be used alongside a physical inspection. Should the vehicle be wrongly identified, this can lead to bodyshops over or under ordering on replacement parts, or ordering incorrect parts for the model option, leading to further delays in key-to-key times, as well as increasing costs to rectify any incorrect orders.

Pressures of the repair process

With new vehicle technology comes the need for bodyshops to introduce new and innovative ways of assessing and repairing damage, including physical equipment as well as technology. With the main emphasis on safety, the repair and re-calibration of safety equipment to manufacturer standards is more vital than ever. If this needs to be outsourced due to bespoke, expensive equipment being used, this will inevitably increase the initial outlay for bodyshops.

Furthermore, if the vehicle’s ADAS technology isn’t correctly re-calibrated in the first instance, any subsequent failure of the technology in an incident could have significant legal and financial consequences for the bodyshop and insurer responsible for repairing the vehicle.

Using state-of-the-art technology properly illustrates the full scope of damage that the vehicle has sustained to bodyshop technicians, providing them with a clear picture of the repairs required and any replacement parts which are needed, including re-calibration methods. Such damage capture technology is increasingly powered through the use of Artificial Intelligence (AI), which could prove a further expense for bodyshops.

However, the advantages of using AI to streamline the manual damage assessment, serving as a helping hand to the human assessor rather than a replacement, cannot be overlooked, thanks to its potential to significantly enhance a bodyshop’s overall decision-making process. This will help to improve key-to-key times, improve efficiency and ultimately increase customer satisfaction.

The complexity of new vehicles has meant the time taken to initially assess damage to a vehicle has increased, but the allotted time in which to do it is constantly shrinking due to increased demand and a constant requirement to keep customer satisfaction levels high.

As a result, repairers are increasingly unable to spend adequate time at the vehicle evaluating the damage, with many now operating with a higher risk of submitting inaccurate or incomplete damage assessments at the first pass.

With the number of vehicles entering bodyshops in need of repair, costs are rising in every area. According to our latest statistics - based on over 21 million UK assessments in the last ten years - the average estimate total has soared by 34%, from £1,163 in 2007 to £1,558 in June 2017, with this rise compounded by the weakening value of the Pound in the last decade.

This is to some extent due to the rising overall number and costs of parts, with the average net prices for every estimate calculated using Audatex increasing by an average of 42.6% in the same period, from £502 in 2007 to £716 in June 2017. This has resulted in the average cost per part increasing by 55% between 2007 and 2017, rising from an average of £52.64 to £82.41.

It’s clear that the entire repairer community must strike the right balance between the human and new technologies, in order to keep up with increasing demand and control costs. However, with the average cost of repairing a vehicle continuing to rise, bodyshops must streamline their overall operations, continuously analysing where they can help to minimise this rise in expense throughout the claim and repair process, while maintaining profitability.

Neil Garrett
Neil.Garrett@audatex.co.uk