Increasingly Expensive Repairs Raising Total Loss Frequency
It’s quite the conundrum, Bob Tschippert says: Of course we welcome technological advances that improve vehicle safety—yet, those advances, in theory, will reduce the amount of work for collision repair shops.
Tschippert, senior vice president of the popular underwriting company Risk Theory, wants to throw one more wrench into the future of vehicles: As fewer and fewer automobiles are involved in collisions, an increasing percentage of those crashes are likely to be deemed total losses, thanks to increasingly expensive vehicular technology.
The trend has already begun, according to information from CCC Information Services, which found that the percentage of collisions flagged for total losses—which had remained steady at 17 percent for several years—rose to 18.2 percent in 2015, and 19.5 percent in 2016.
Tschippert spoke with FenderBender to assess the driving factors of increased total losses and how the industry can expect to overcome it.
What technology has been the biggest driver of more expensive repairs?
The airbags have become a key factor. When you think about a front-end collision, you have the airbag sensors that are in the front of the vehicle, and then you have the knee airbags, backseat airbags, safety belt airbags that deploy as a result of those sensors being activated. Fixing those airbags runs anywhere from $1,000–$4,500 per airbag. And when you think about the average cost of a vehicle being $25,000, if you blow two or three airbags in a collision, you’re suddenly at 40–50 percent of the vehicle value just in airbag and sensor replacement.
In addition to the front end, there may be engine compartment damage, radiator damage, etc. With all that technology, it’s drawing the percentage of the repair cost up. In relation to the overall vehicle value, you’re hitting a very high number to a point where the insurance company says, “It doesn’t make sense for us to repair this vehicle,” and it’s declared a total loss.
Have any other laws or issues allowed total losses to gain steam?
You could look at a lot of different things, such as the CAFE laws. There are a lot of components that have moved from sheet metal to aluminum, or even from heavier sheet metal to a lighter sheet metal. Now it’s all more damageable. With aluminum, you spend a lot more hours trying to repair it.
Take the Takata airbag recall, too. At this point, the manufacturers are struggling to get replacement airbags in damaged vehicles. So, if there’s a backlog of trying to get those parts in and cars are just sitting in a collision repair shop, you can’t end up waiting three months to get a replacement airbag.
I think all these changes are just chasing whatever is put out in front of the manufacturer. Whether that be occupant safety, fuel economy, OEM certifications—we continue to advance to whatever is put out there in front of us.
Many times, shops fail to realize a job is a total loss during the estimating process. How important is it for shops to have the right repair information in front of them?
Having the necessary tools and being able to quickly and accurately assess the damage to determine the viability of repairs is critical. Having to go back to a customer with supplements will erode confidence in the repair facility very quickly.
As you look at the average cost of a vehicle, you’re dealing with percentages. Depending on what type of repair has to be made, when you start heading north of 50 percent of the car’s value, you should start wondering, “What is this really going to mean as far as our ability to repair it? How much will it cost to warrant the repair is done right? Will the insurer be willing to pay for it?” When you’re at 70 percent of the vehicle’s overall value, it’s tough to keep everybody happy in that scenario.
Total losses tend to decrease customer satisfaction. What can shops to do alleviate that damage?
Transparency and communication are keys to keeping the customers’ satisfaction high during the initial inspection process. Also, having access to alternative transportation, like rental cars, is vital.
Assessing all vehicle damage up front and eliminating supplements will help drive down costs. More total losses isn’t great for body shops, but when you’re taking it from the insurance industry’s perspective, it makes sense. That will help foster cooperation between both sides.
So, I think it’s a good opportunity for the industry as a whole to sit down and talk about ways to help curb some of those additional expenses, and ways we can work better together. At the end of the day, everyone in the body shop industry and the insurance industry has to ask themselves what is right for the customer. If we can all agree upon that, I think the right decision will be made.