Over the last several years, the collision repair industry has faced numerous challenges, including:
- keeping employees safe during the pandemic while remaining open and operating as essential businesses;
- managing parts and material shortages from supply chain disruptions;
- navigating staffing challenges;
- meeting a growing demand for training and tooling to support the repair of an increasingly complex vehicle fleet; and
- addressing the increasing demand among customers for a digitized experience.
These challenges have impacted the auto insurance industry, as well. Nearly 90% of the overall collision repair industry revenue is from insurance-paid work — where the customer has made an insurance claim — while the remaining 10% is consumer paid out-of-pocket with no insurance claim.
As claim counts and resulting repair volumes continue to build towards pre-COVID levels, industry-wide capacity within the collision repair industry is being pushed to the brink. According to surveys conducted by CRASH Network, nearly all collision repair shops reported significant increases in their backlog of work, with 85% reporting they are scheduling new work two weeks or more into the future. Both the percentage of shops reporting they have at least some backlog and the average number of weeks of backlog continue to remain at their highest points in the past six years (Figure 1).
The key issues driving that backlog are parts availability and a shortage of technicians. Supply chain disruptions continue to plague our industry, leaving shops waiting weeks to months for certain parts. Several large suppliers are now reporting some modest improvements in fill rates as the volume of parts being shipped from places like Taiwan has grown, but challenges remain.
According to the TechForce Foundation’s 2021 Report, the overall number of collision technicians has fallen from 160,400 in 2016 to 153,700 in 2020. Retirement of baby boomers, transfers and turnovers, and new positions will create demand for over 19,000 collision technicians annually between 2021 and 2025. This data suggests the technician shortage is not a short-term issue for repairers, but rather one that will be a drag on industry capacity for years to come. With shops competing for a smaller number of technicians and increasing repair volumes, many shops have indicated they cannot repair as many vehicles at the same time as they did before the pandemic.
The repair mix
While repairers continue to see an elevated number of non-driveable DRP repairs when compared to 2019 and 2020 (Figure 2), both driveable and non-driveable repairs are taking longer (Figure 3), and repairer productivity is lower (Figure 4). Unfortunately, as repair costs climb, repairer productivity can sometimes suffer, customer satisfaction with both the repairer and the insurer can fall, and the likelihood that the customer needs to bring their vehicle back for additional work after repairs are completed also increases (Figure 5).
And it’s not just repair time that is taking longer. The average number of days from when the loss is reported to when the assignment for estimate is made has grown, as well as the average number of days from last estimate assignment to estimate sent (Figure 6). Only appraisals generated via photo estimating technology saw an improvement in days from last assignment sent to estimate sent days average. With photo estimating, insurers can continue to provide customers with their initial appraisal and the information they need to make decisions much faster, such as whether they want to have their car repaired or make an insurance claim. And photo estimating usage continues to see strong adoption. (Figure 7).
Another factor driving up overall claim cycle time is the growth in the number of days from when a customer has their estimate to when they can bring their vehicle in for repairs (Figure 8). All combined, the average number of days from when a loss is reported to when the vehicle is picked up after a repair has grown to nearly 50 days (Figure 9).
As auto accident frequency continues its recovery to pre-pandemic levels, collision industry capacity will be stressed further. Unfortunately, that means the auto insurance industry will also experience further challenges in the year ahead, whether from higher loss costs, longer cycle times or lower customer satisfaction with the vehicle repair and insurer handling of the claim.
In response to these headwinds, the industry has ramped up its adoption of technology to achieve increased efficiencies and make the insurance claim and repair process more seamless for consumers. Further adoption of digital, mobile and AI technologies by auto insurers will be key to their ability to help counter growing vehicle repair times, by providing customers with the information they need on the right platform to make decisions about their claims.
Jason Verlen ([email protected]) is the vice president of product management at CCC.
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Adoption of AI processing in auto claims accelerated in 2022
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.