In March, CCC Information Services published its 2018 Crash Course report. The report, prepared by Susanna Gotsch, CCC director of industry analysis, takes a look at the full auto ownership life cycle, from auto shopping to purchase through vehicle end of life.
The report explores how the buy, drive, crash and repair of the U.S. markets has trended and how it will change in the future.
FenderBender sat down with Gotsch to find the key takeaway for all collision repair shops.
What is the main takeaway for all collision repair shops?
I think it’s a theme commonly heard throughout the industry right now that the pace of the automotive fleet is advancing and requires a greater knowledge base to ensure shops know how to repair the vehicle. This requires shops to expand what their workforce looks like and expand their skill sets into different materials, like aluminum.
What does this mean for repairs?
Shops are moving into a territory where fleet vehicles, like the 2005 Honda Accord, cost more to be repaired and replaced than totaled. The average age of vehicles on the road is 11.7 years and a vehicle put through claims is, on average, much younger and within the last few years of production, from 2018 to 2016. Even base mainstream vehicles now have technology that wasn’t incorporated into vehicles 10 years ago.
The bottom line is that shops still seeing claim frequency at an elevated rate with people driving too fast or driving distracted.
Now, we’re seeing the adoption of advanced driver-assistance systems so shops need to be willing to invest that training.
In light of this, what types of training will be required?
Some DRP shops want their technicians to be I-CAR Gold certified and some want other certified programs. For aluminum repairs, this will mean a specific part of the shop needs to be quarantined from metal repairs.
There are also different welding tools on the market and even just waterborne paint that requires a specific paint booth. Shops need to stay on top of the OEM-recommended repairs.
For example, someone from Verifacts told a story a couple years ago about how they removed a section of panel that triggered a sensor to blow all the air bags in the truck. There are situations like that where the shops aren’t reading the OE instructions.
What is the driving force behind claims frequency at an elevated rate?
There are two primary drivers. One is that during the recession, fewer vehicles entered the fleet, which helped accelerate the aging process. Vehicles are also made to last longer now and more people are holding onto them for longer periods.
In 2005, only about 8 percent of the vehicles that were flagged as a claims or loss were 16 years or older. These cars last longer so consumers drive them longer and insure them longer. It used to be that people would only cover mandatory coverage liability. Now, it doesn’t take a lot to get to the point of $3,000 in damages and after three years of a vehicle’s life cycle, the value depreciates by 50 percent, so that coverage has changed.
What will we see in the future in terms of total losses?
We won’t see the same increase in total losses but in 2019 we’ll see a moderate increase and then the rate of frequency will flatten out.
Automakers, like Nissan, and regulations from the National Highway Traffic Safety Administration have changed the way vehicles absorb the energy of the crash. There may be frame damage and energy traveling through the hood and rails but there will be more damage to electronics.
There’s front-to-rear crash prevention, automatic braking systems and more that have helped reduce the severity of a crash. We’ve seen a 50 percent reduction rate in police-reported crashes but right now, there are less than 20 percent of vehicles on the road with this technology.
Also, with the newer models, there is a larger share of the cost contributed to replacement parts, which reduces the overall margin for shops. There’s a cost pressure for the insurance company as the cost of repairs increase. I think that with this increasing, there will also be an increase in premiums.
