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Handling total losses

Saturday, October 3, 2015 - 07:00
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At a recent industry meeting I was chatting with some other repairers about insurance Direct Repair Program (DRP) relationships. One of the people works for one of the big four consolidators. He said, “We are the company of ‘YES.’ Anything they (insurers) ask of us, the answer is always yes.”

As an industry we seem to be going in that direction. We continue to provide more and more administrative services for the insurers through our DRP commitments. Many insurers have been reducing staff as repairers increase staff to handle more. Self-managed programs are becoming more prevalent. Repairers are offering to do more, or at least agreeing to do more, and insurers appear to be happy to pass on responsibilities while obviously enjoying the cost savings. Receiving customer referrals from insurers is obviously one of the motives. Another consideration is the increasing insurer dependence upon repairers, thus bringing an increase in perceived stability. In other words, it’s less likely insurers would remove a repairer from a program on a whim when both parties know the insurer doesn’t have the staff to handle the claim handling responsibilities being provided by a large repairer.

Handling total loss administrative work for insurers is one of those services that has become common in recent years. Generally shops are providing the service for no charge, often as a required provision within DRP agreements. It can be very time consuming. Not only is there a cost of staff labor, but also an obligation to provide accuracy. In some cases, a resulting liability can come with expense as well. I’ll discuss more on that later.

Total losses, industry trends

According to CCC Information Services, U.S. vehicle population has begun to grow again, and more miles are being driven with the greatest growth on interstates where accidents occur at higher speeds. Whether or not this is helping to drive up repair costs, increasing vehicle complexity alone certainly is. With a ‘hangover’ of an older fleet still on the road in the U.S. driving up total loss frequency, the industry is the unfortunate recipient of a market where frequency has returned to pre-recession levels, and costs are rising for both repairs and increased volume of total losses. 

Don Mikrut, VP MSO Operations, AudaExplore, provided the following information:

Total Loss vs. Repair

Volume Changes Industry

o   Collision claims frequency increased 5.92 claims per 100 earned car years.

o   In 2014, there were over 401,000 more collision claims vs. 2013.

Source of data from CollisionWeek & ISS

Volume Changes Total Loss from Insight

o   Total Loss evaluations increased 16% in 2014 vs. 2013

o   Total Loss evaluations projected to increase in 2015 is 8%

·      We predict that the volume of Total Loss claims will increase 8% in 2015 over what it was in 2014, while Total Loss Claims increased 16% in 2014 over 2013. 

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