Susanna Gotsch, lead analyst at Chicago-based auto claims andcollision repair software company CCC Information Services,says that the property/casualty insurance and collision repairindustries are at a crucial “inflection point” as claims frequencyand costs are on the rise.

In the “2016 Crash Course“ report released by CCC,Gotsch and other industry experts look at the factors driving thesecosts that will have a direct effect on the auto insurance repairindustry.

Today's automobiles can be described as technology on wheelswith onboard computers, microprocessors, a range of sensors,cameras, radar and automated features, and other enhancements toimprove safety. The National Traffic Safety Board's “Most Wanted List of Transportation Improvements 2016”included making crash avoidance technology standard for allvehicles, as well as improving occupant protection, expanding theuse of recorders to improve safety and disconnecting items thatdistract drivers.

The CCC report says that as more “collision avoidancetechnologies make their way into the mainstream vehiclepopulation,” the number of vehicles using this technology willincrease dramatically. The Arlington, Va.-based Insurance Institute forHighway Safety estimates that close to 50% of 2015 model yearvehicles had front crash prevention as a standard or optionalfeature. However, 72% of the vehicles currently on the road are atleast six years old or older, meaning only a small fractionactually have accident-reducing technology.

Auto claims on the rise

The number of accidents for private passenger cars had fallenover the past two decades as a result of higher unemployment,rising gas prices, graduated licensing for teens and higherinsurance deductibles.

All of that changed in 2015 when lower fuel prices translatedinto more vehicles on the road and the number of claims rose. Otherfactors that led to an increase in claims were severe winters in2014 and 2015, improved employment opportunities, a jump in newvehicle sales, increased road congestion and a crumblinginfrastructure.

According to a report by the Washington, D.C.-based Road InformationProgram, a nonprofit that researches highway transportation,nearly 3 trillion miles are driven annually, and approximatelyone-quarter of the roads that carry 53% of the traffic are in poorcondition.

While technology has improved vehicle safety, it also causesmore distracted drivers who look at their phones for “just aminute” to check an e-mail, text message or answer a call. In 2013,the National Safety Council estimated that 20% of fatal, injury andproperty-damage crashes were related to cellphone use. And whilethe number of drivers talking on handheld phones has dropped, thenumber of those checking their handheld devices while driving hasactually increased.

Related: 10 factors affecting auto and P&Cinsurers

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This graph illustrates that handheld phone usage hasincreased despite fewer people holding their phones to talk whiledriving.

Given the number of older vehicles on the road, the questionbecomes whether to repair or replace them when there is an accidentbecause they reach the total-loss threshold sooner than their newercounterparts. CCC found that vehicle repair costs have increasedfor vehicles of all ages, and more vehicles are becoming totallosses.

The greatest increase in miles driven also seems to occur onhighways where higher speeds and an increasing number of vehiclesresult in more severe accidents. This factor combined with thenumber of older vehicles on the road could result in greaterfrequency of cars being considered a total loss when involved in acrash.

The increased use of technology in vehicles is also affectingrepair costs because parts are more complex and require additionallabor hours for repairs. CCC says replacement parts account forapproximately 40% of the overall repair dollars, and “new vehiclesmanufactured today are changing the landscape for insurers andcollision repairers.”

New tools, equipment and training are required to repairvehicles as manufacturers increase their use of aluminum and otherlighter-weight materials to meet stricter fuel efficiencyguidelines. Lighting (headlights and taillights) that has improvedsafety features, sensors and cameras will also impact replacementpart and repair costs.

Related: 20 auto insurance companies ranked from worst tobest by consumers

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