The auto repair industry faces significant challenges as a result of COVID-19, including increased glass prices, higher speed accidents, appreciating pre-owned vehicle values and a plethora of supply chain issues. In addition, Auto physical damage (APD) claims face increased indemnity costs, extended repair times and new challenges to the customer experience. In this environment, it is important to understand current developments and the impact they have on the auto industry.
Increased severity in the auto repair industry
The auto repair industry has experienced significant severity increases across the board. Innovative technology, limited raw materials and supply chain challenges have resulted in parts price increases that, combined with a significant shortage of body shop technicians, have quickly driven up the cost of repairs. According to CCC Intelligent Solutions*:
- Repair costs have increased over $500 per repair in the last two years (8% in 2021 and 7% in 2020).
- Shop backups are at record levels due to supply chain and labor issues, with the national average repair time at 3.4 weeks (twice the average from prior years).
- When damage exceeds $10,000, repair time is now greater than 37 days, a full week longer than in 2020.
Other factors that drive severity include the increasing complexity of vehicles, increased travel speeds that result in higher impact collisions, and semiconductor chip shortages that have depleted the new car supply and increased used car prices.
1. Vehicle complexity and supply chain delays
The proliferation of vehicles equipped with sophisticated advanced driver-assistance systems (ADAS) has a major effect on the auto repair industry. These vehicles require more calibration and scanning with updated equipment that can only be completed by trained technicians, and that increased overhead is eventually passed on to the customer. The amount of time it takes to complete vehicle repairs has also increased.
- CNA’s rental car vendor, Enterprise Holding, has reported an overall industry increase in average rental time from 13 days per repair in 2020 to 17 days in 2021.
- In some cases, it can take months to obtain parts due to supply chain issues.
2. Higher impact collisions
The pandemic has also affected the way people drive. Remote work and reduced congestion continue to lead to faster travel speeds and reckless driving, resulting in an increase in non-drivable vehicles and total losses.
Since 2019, the industry has experienced a 10% increase in claims with airbags deployed (per CCC Intelligent Solutions*), a key indicator for high-impact accidents. The number of parts needed in non-drivable losses has more than doubled (22 parts to nine for drivable losses), resulting in increased loss costs.
At the first notice of loss (FNOL) involving higher severity, CNA enables quick evaluation of the damages to determine the proper method of repair, move salvage quickly and control loss-of-use claims.
3. New car supply and the impact on used car pricing
According to Kelley Blue Book, chip shortages and supply chain delays have resulted in limited availability of new vehicles, driving up the average new car price by over 14% in 2021. With the decrease in units sold, the average new car price in December 2021 was $47,000.
The shortage of new cars has created excess demand for used cars, driving up the price of used cars approximately 39% in 2021, which ultimately increases total loss settlements. According to J.D. Power Valuation Services, the Used Vehicle Price Index reached its highest level on record in 2021.
CNA Claims combats these challenges by handling total losses in one unit. This specialized team, through many years of experience and expertise, ensures prompt and fair settlements for CNA customers.
Pressures in the commercial truck and heavy equipment industries
Similar pressures exist in the commercial truck and heavy equipment industries. Supply shortages have driven pricing up, with truck prices reaching all-time highs in 2021. With a strain on supply of new heavy equipment, similar price increases are occurring in the used equipment sector as well. DCI Solution outlines how the combination of these factors and those below results in delayed repairs and increased settlement values for larger vehicles.
- Auction pricing for late-model sleeper tractors was 96.3% higher than in 2020.
- Medium-duty trucks were 70.7% higher in 2021 versus 2020.
- Used construction equipment saw a price increase of almost 17% from 2020 to 2021, despite the average age also being up almost 14%.
As these trends continue to impact the auto repair industry, it is critical to combat them with early intervention and collaboration with industry experts.
For more information on the auto repair industry and CNA’s approach to APD claims handling, contact Tom Mason, APD Claims Director, at tom.mason@cna.com.
* Gotsch, Susanna. “2022 and the New Norm in the Collision Industry,” presented Jan. 27, 2022.
