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PARTNERS IN REPAIRS
wards of 200 computers, many of which are located in accident zones.
For the insurance industry, vehicle technology ad- vancements are causing them some cost challenges as well as some uncertainty. It is requiring insurers to challenge traditional approaches to repairs and will drive significant changes to their legacy business mod- els and most likely to their parts policies, which we are already seeing some large insurers acting on. This will require all stakeholders to better understand the fu- ture and play their part. Automotive recyclers have a significant role to play in this and will need to become more proactive.
At a presentation by CCC in September 2017, it was established that in the U.S.: • Auto accident claims increased after the GFC and have now begun to stabilize with the expectation that, in time, it will trend down due to the collision avoidance technologies aboard new vehicles.
• Although new technologies will take a few years to filter through, it is already evident that vehicle de- sign changes are driving an increase in repair costs.
• New vehicles are showing the largest repair cost increases.
• There will be fewer but more expensive repairs. • Total losses as a percentage of total claims are in- creasing and reached 18.8 percent in the March 2017 quarter.
• With every vehicle redesign or new series, the cost of many commonly used parts has also grown. Insurers are now looking at their parts policies and how they can enable the use of quality, safe and where required, certified parts. This will include some high value, technology components that have been tested, scanned and certified for sale/use that would other- wise not have been possible without certification. In doing so, not only will insurers manage their costs better, they will by default grow the opportunity to in- centivize repairers to use these parts and share in the commercial benefits.
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Insurers asking repairers to use alternative parts at a reduced price and margin for the repairer is not often well received, and understandably so. Why would you want to use a part that takes money out of your pocket?
You see, if we are able to use more recycled parts and certified parts, many vehicles that are currently deemed as uneconomical total losses will actually be repaired. This would be a wonderful outcome for repairers, insurers, automotive recyclers, alternative parts distributors and OEM’s. Again, another anom- aly, right? How can the OEM’s benefit out of more alternative parts used on vehicles? Well, they make up the majority of parts used in the repair process and most probably always will, so they will therefore be the ones with most to gain out of enabling the repair of more vehicles rather than having them total loss. Overall dialogue with insurers indicates both an appetite and genuine willingness to drive this type of change. The rising cost of repairs (the need), coupled with a clearer view of what is possible (the opportunity) means that insurers will look to incentivizing the use of alternative parts, be it recycled or certified. What is re- quired next are supply chain and the changes it needs to make and play its part in enabling the opportunity.
For over 10 years, Chris Daglis of PARTnered Solu- tions has been the leading independent advisor to major Australian insurers on alternative parts strategies. He is a leader respected for building models that support positive cost outcomes while growing parts margins for collision repair-
ers. He has an unrivaled understanding of the key drivers for all stakeholders and an ability to build strategic solutions for insurers, repairers and suppliers that guarantee mutually ben- eficial outcomes. You can reach Chris at chris.daglis@cdps. com.au, on mobile +61 411 743 560 or at www.cdps.com.au.
March-April 2018 • AUTOMOTIVE RECYCLING