What are some of the current and upcoming market trends that will impact the industry?
Right now, if you look at what’s changed in terms of technology, years ago you would have to sit at a desktop computer. And now consumers have the same computing power on a single phone. So it changes the environment in terms of where work can be done, how it can be done and who can do it.
Technology also leads to a lot more transparency. You can share an estimate, for example, and you can write the estimate, share it with the insurance company and they can review it, approve it, and compare it to photos. The technology has facilitated a lot better transparency and communication.
As I showed [in my presentation at NACE], we’ve seen a more growing trend towards DRPs, as carriers are really faced with balancing different costs while not exceeding what they’re taking in from a premium perspective. I think that’s changed, to a certain extent, the ability for the different constituencies to communicate and work together towards the consumer. From the consumer standpoint, they don’t understand the insurance process very well. So it’s allowed them to have a much more seamless process for the consumer. It builds a relationship with the consumer and the shop through the course of the repair so the shop can get feedback from the customer, the customer can recommend the shop to friends and family, and that ultimately drives business through the door.
If you look at overall frequency trends for the next few years, I really think some of those crash avoidance systems and the technology in those systems have the potential to ramp up and change things much faster than other things we’ve seen to date. Some of the systems are better than others, but I think that has the ability to change the trajectory around frequency and severity as well.
What are the factors that are driving these marketplace changes?
Frequency for the overall marketplace and number of accidents in the U.S. had been on the decline for many years, even before the recession. Once we hit the recession, people stopped driving, they didn’t make claims, and it dropped even further. It’s now returned to where it was pre-recession, but we’re looking at a steady but continuous decline based on demographics, older drivers, some of the younger drivers not wanting to purchase a car.
That changes the dynamic from person to car, and it now becomes more about personal mobility. Personal mobility takes on different components. I think longer term, it’s going to change how potentially the auto insurance product is marketed and sold. Maybe it will be sold not to the vehicle, but to specific drivers and that can be imported to one vehicle to the next.
How will these changes impact the day-to-day operations for shop owners?
Because we have a lot of older vehicles and they’re made well and scrappage rates are down, if you’re a shop, you might not need to make the investment in tooling and training, depending on the type of vehicles that you see. But it’s coming. As a shop owner, I think the hardest challenge will be, when is the right time for me to make the investment in tooling and training?
A lot of that is understanding what’s happening in your market, who the carriers are, what types of expectations they have around tooling and training, and also the types of vehicles you’re going to be asked to repair. For example if you’re in Southern California, you’re more than likely going to have the need for that stuff much faster than in a suburb of Detroit.
There’s also a potential for a lot of liability if you repair a car and it’s not repaired properly, even though it seemingly is, but you’re just not aware of it because you don’t have all the information.
Unfortunately, all of that is expensive, so it’s about understanding when the right time is.