Editor's Note: This article originally appeared in National Underwriter, P&C.

The tough economy has led to a decrease in the number of vehicles rated total losses after a crash, according to a provider of collision data processing systems used by insurers and body shops.

That finding was one of many in the latest Industry Trends Report produced by San Diego-based Mitchell International.

Mitchell also noted a reduction in crash damage appraisal values, collision losses, and third-party property damage. At the same time, the firm found an increase in use of after-market and remanufactured parts and higher costs for repair materials and labor.

Greg Horn, Mitchell vice president of industry relations, writing in the report about the lower number of wrecked vehicles appraised as total losses, explained that the standard for totaling a car is a finding that the cost of repairs would exceed 80 percent of the actual cash value.

At this point, with vehicle sales slumping, the average age of passenger cars is 10 years -- the "oldest in our history," reported Mr. Horn, which would lead one to think total losses would increase.

But the number is being kept down, he explained, because there are now an "astounding" number of uninsured motorists -- up to 25 percent in some states. Further, owners are increasingly dropping collision and comprehensive on older cars, and "if they have an at-fault total loss accident, there is no coverage on this vehicle."

Mr. Horn added that many of the older cars on the road are sustaining their value, with used car values rising every month in 2009 driven by the fact that there were fewer trade-ins.

He predicted that the trend for total losses will continue in 2010 because "people will keep holding onto their cars because of the still struggling economy, which will sustain high used car values and decrease the pool of vehicles carrying first-party coverage."

The report found average final appraised value for collision damage was $2,494 in the fourth quarter of 2009, or $127 less than the period in the previous year.

Initial appraisal comprehensive loss figures, which include losses for items such as through theft and hail damage, increased in the fourth quarter by $22. Gross third property damage appraisals declined by $62 to $2,275.

The percentage of original equipment parts dollars going for repair declined to 68 percent in the fourth quarter compared with 72.8 percent in the 2008 period, which Mitchell attributed to dealership turmoil, causing cash-strapped dealers to reduce inventoried parts.

Conversely, after-market parts spending increased from 11 percent to 12.9 percent in the quarter.

The cost of paint and materials registered a .60 relative increase for the fourth quarter and a listing of labor rates by full year in 11 states showed only New Jersey saw prices remain steady, while costs elsewhere were up from 1 percent to a high of 4 percent in Arizona.

Dan Hays is assistant managing editor of National Underwriter, part of Summit Business Media's P&C Magazine Group, which includes Claims.

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Poor Economy Blamed for Fewer Vehicle Total Losses

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