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Collision frequency predicted to drop, but repair costs to rise

So where do the market predictions from CCC leave you?
Thursday, April 12, 2018 - 07:00
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Repair cost trends
So repair frequency is estimated to drop significantly in the future. But the market should not panic, as repair costs continue to rise. One of the strongest factors impacting this is the type of vehicle that people are driving, Gotsch said. New cars cost more today than they ever have.

“As cost of vehicles grow, so does cost of parts, and vehicle technology and complexity is driving repair costs,” she said. Repair costs for newer vehicles are 70 percent higher than for those models seven years old or older.

Parts and labor costs are also driving repair costs. CCC reports that across collision estimates, costs are divided as follows: 11 percent other; 8 percent materials; 41 percent labor; and 40 percent parts. So labor hours are increasing, labor rates are increasing, parts cost is increasing.

CCC also looked at cost of repair for vehicles equipped with ADAS technology. They found that front-end collision repair costs have gone down — indicating the technology is working and is reducing accident severity. However, rear-end collision repair costs have increased, indicative of the increased complexity in repairing these vehicles.

OEM standards
Another repair challenge that continues is understanding what requirements are needed for each individual vehicle, Gotsch said. Keys-to-keys repair time has increased 1 full day industry wide, and more than 2 full days for non-drivable vehicles. Higher repair costs are leading to longer repair times — this includes more time needed to research repair standards, more parts to replace and more technology to understand and calibrate.

Customer satisfaction is also dropping as costs rise. However, a quality repair and fewer comebacks lead to higher satisfaction levels. Gotsch noted that consumers did report higher levels of satisfaction on longer and more expensive repairs when a shop was communicative about the process and what was happening with the repair.

She also said that as technology increases, shops should expect to see more pressure from the market to have OEM certification and a certain level of continued training.

In summary, CCC is expecting to see a steady level of claim frequency. People are buying more vehicles. Over time, ADAS will reduce frequency. Repair costs will continue to grow 2-3 percent annually. And the market will be driving the need for proper repairs.

“The market is a challenging market, but it also offers a lot of opportunity for those willing to make those investments moving forward,” Gotsch said.

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