Insurance companies, like collision repairers, have kept a close eye on the expanded use of technology in new vehicles, the aging of the vehicle fleet, the rising cost of repairs, and the overall decline in collisions.
"Repairing a vehicle today is increasingly like conducting a repair on a high-tech aircraft," says Robert Hartwig, president and economist at the Insurance Information Institute. "There are an enormous number of electronic components that can be damaged. The skill level needed at the body shops is increasing. The need for training is going to increase."
That means more upward pressure on repair costs as those vehicles become more sophisticated, and are built with new light-weight metals and composite materials. Shops will need to invest in order to keep up with these changes, and insurance companies are increasingly looking for the shops (and groups of shops) that can provide that level of skill at the best price. "Advancements in vehicle technology will require repairers to stay up-to-date on training and repair procedures," says State Farm spokesperson Dick Luedke. "Our goal is to work with repairers who continue to provide the best combination of quality, efficiency and competitive price as we deliver claim service to our customers."
In addition to repairability challenges, the continued aging of the vehicle fleet (the most recent data puts the average age of vehicles on the road at 11.4 years and still rising) will boost total losses. The good news is that collision-related deaths and injuries have generally declined over the past decade. "While the average age of vehicles on the road has risen, the level of safety technology in the average vehicle on the road has increased," Luedke says. "That has had the effect of reducing the frequency of crashes, which from State Farm's perspective is a good thing."
"In the longer run, a lot of these technologies are designed to avoid accidents altogether, or at least minimize impacts," Hartwig adds. "What it means for both insurers and automobile repair facilities is that there will be fewer accidents and fewer claims. Those that do occur will be expensive because of damaged electronics. That's what the future is going to look like."
According to Allstate Auto Claims Director Sam Whiteman, these new market realities should provide more opportunities for repairers and insurers to work together to make sure they fix vehicles cost effectively and profitably. "We should see less accidents, but with the newer materials and technology we should anticipate a higher cost per claim for losses involving these vehicles," Whiteman says. "Keep in mind this is still working through the market place. The repairer and the insurance company need to work together, today and tomorrow to serve their common customer. I think those that work together will have an advantage (happier customer) over those that work separately."