Collision Repair Contours Changing, Perhaps Permanently

These past years, the auto insurance and collision repair industries have navigated the winding -- and often treacherous -- roads of a recession. While cash-strapped consumers continue to grapple with unemployment and mounting debt, automotive sales have waned. Because the overall economic recovery has been sluggish, the resultant dip in claim frequency and number of repairs has contributed to a lingering soft market.

In its recent semi-annual publication titled "CCC Crash Course Update 2010," CCC Information Services Inc. suggests that these factors have noticeably altered the auto damage repair landscape, perhaps irrevocably. The report's author, Susanna Gotsch, lead analyst at CCC Information Services Inc., discussed how repairer optimism and automotive claim frequency underscores the relationship between claim frequency and sales.

"As quarterly frequency increases, the percentage of shops reporting lower sales in CollisionWeek's quarterly survey of repairer optimism goes down," she wrote. "There has been a significant change [in] the way that vehicles were repaired ten years ago, and how they will be repaired in the future."

Gotsch pointed to declining accident frequency, more total losses, and lower-dollar repair orders, all of which have translated to fewer incoming dollars for repair shops.

Yet, consumer expectations have never been higher. In the report, CCC emphasized that the push to improve customer service and speed of claim settlement -- along with new regulations -- has created an environment where multiple claim-handling tasks are blending into the repair process. As a result, shops have felt the pinch to invest in processes, additional training, and technology.

"Repairers are being asked to extend their expertise beyond vehicle repair, and into areas such as IT management to meet specific business partner requirements," explained Gotsch. "As more vehicles are equipped with accident avoidance technology like electronic stability control, the expectation is that accident frequency should continue to decline. With the parallel introduction of other new materials and technologies, the industry will ultimately see fewer, more complex repairs."

CCC's observations appear to be well-founded. Because of the higher incidence of total losses, shops report an overall decline in the number of repairs they perform. In 2010, however, CCC did note a subtle drop in total loss frequency.

"Over the last five years, total loss frequency increased by 1.26 percent; in a total market of approximately 18 million claims," Gotsch said. "Roughly speaking, this represents 225,000 more total losses annually."

Given such challenges, what will facilitate a smoother ride ahead for insurers and collision repair shops alike? Technology and staying attuned to what is driving customers' needs and preferences.

"The Internet and social media have changed the speed and manner in which consumers get their news and communicate, and, perhaps more significantly, changed the expectations and desires of the consumer," Gotsch concluded. "Companies need to be even more aware of variances among their customer base -- by age, demographic, employment situation, and geography -- than potentially ever before. As it often does, technology is leading us into a new era. The key is for shops and insurers to understand and adjust to the changing market, and use the technology to provide customers with a transparent and efficient claim experience."

Learn more about the link between claim management and customer satisfaction during next week's webinar.

To view or download an electronic copy of CCC Crash Course Update 2010, visit CCC Information Services Inc.'s web site.