Collision frequency predicted to drop, but repair costs to rise

April 12, 2018
As added safety features continue to be implemented into new car design, industry analysts are predicting collision frequency to drop by about 30 percent by 2050.
WESTMINSTER, COLO — As added safety features continue to be implemented into new car design, industry analysts are predicting collision frequency to drop by about 30 percent by 2050. However, because of the complexity of new technology and safety features, repair costs will continue to rise.

Susanna Gotsch, director and industry analyst with CCC, presented an update from the company’s Crash Course 2018 report to the attendees of the Collision Industry Conference in Denver on April 12. 

Currently, there continues to be growth in collision frequency, but this trend is expected to taper off. Gotsch explained that multiple factors have continued to push the rate of collision frequency — including more severe weather such as hail, extended winter weather patterns and a growing U.S. population that is putting more drivers on the road, although not more miles driven per driver. Higher speed limits across the country are also leading to more severe accidents. Forty-one states now have speed limits of 70 mph or more on some portion of their roadway, Gotsch said. And urban miles driven has grown over the past decade.

Change in consumer behavior
In the US, more than 85 percent of people still use an automobile as the primary means of transportation to work. During the recession, the average number of vehicles on the road did drop; this figure has been improving, but is still not back to its peak seen in 2006. We are also seeing a new millennial generation that is putting off lifestyle decisions — buying vehicles, getting married, moving to the suburbs and having children — all behaviors that impact the number of vehicles on the road and miles driven.

During recession, average number of vehicles has dropped. It is improving, but still not back to its peak seen 2006. Now seeing millennial generation buying vehicles, getting married, moving to suburbs and having children later.

Miles driven continues to grow, but slowly. And it is the byproduct of more cars on the road, not individual drivers driving more. And although vehicles continue to get safer, driver behavior remains risky. According to the National Highway Traffic and Safety Association, motor vehicle fatalities caused by risky behaviors rose in 2016 versus 2015. Not using seatbelts, speeding and drunk-driving related deaths all increased. However, drowsy and distracted driving deaths did decrease slightly.

Despite this decrease, driver distraction levels continue to rise, with more drivers on the road texting, reading emails, engaging in social media and talking on hands-free phones.

Safety distractions
As the need and demand for added safety features continues to grow, so does the negative impact — that even safety features can be distracting. The electronic content of vehicles has soared, but many of these systems work differently across the different models, and because of this, consumers are often unaware of how they work.

“As more warnings and icons and things that flash are added to the vehicle, it can actually increase distraction for the driver,” Gotsch said.

Frequency and the future
Going forward, autonomous vehicles will continue to dominate the headlines, and first-generation driver assistance features will continue to be embedded in many new vehicles today. OEs and technology companies are in a race to market. Leading players are forming consortiums to speed up developments and collaboration.

“Regardless of the timeframes, we are starting to see many more vehicles on the road that assist drivers to avoid crashes. That means the vehicles being repaired are more complex and offer more challenges,” Gotsch said.

The number of vehicles on the road continues to grow, while retirement/scrappage rates have remained relatively constant over a period of 30+ years. “We are going to see growth in the fleet, which means opportunity for accidents and accident frequency to stay at steady rates,” Gotsch said.

ADAS impact
By 2050, the Insurance Institute for Highway Safety (IIHS) and the Highway Loss Data Institute (HLDI) are predicting nearly 100 percent of vehicles will be equipped with ADAS technologies including rear parking sensors, adaptive headlights, front crash avoidance, lane departure warning, automatic emergency braking, blind spot monitoring and rear cameras.

“Many cars with this technology will be driving side by side with many others that aren’t,” said Gotsch.

“Crashes have gone down for vehicles with ADAS technologies. This technology is working and will reduce crashes. The question is how quickly will this impact overall market frequency,” Gotsch said. CCC is estimating that by 2050, there will be a 30 percent reduction in crash claims for vehicles equipped with ADAS technology.

Repair cost trends
So repair frequency is estimated to drop significantly in the future. But the market should not panic, as repair costs continue to rise. One of the strongest factors impacting this is the type of vehicle that people are driving, Gotsch said. New cars cost more today than they ever have.

“As cost of vehicles grow, so does cost of parts, and vehicle technology and complexity is driving repair costs,” she said. Repair costs for newer vehicles are 70 percent higher than for those models seven years old or older.

Parts and labor costs are also driving repair costs. CCC reports that across collision estimates, costs are divided as follows: 11 percent other; 8 percent materials; 41 percent labor; and 40 percent parts. So labor hours are increasing, labor rates are increasing, parts cost is increasing.

CCC also looked at cost of repair for vehicles equipped with ADAS technology. They found that front-end collision repair costs have gone down — indicating the technology is working and is reducing accident severity. However, rear-end collision repair costs have increased, indicative of the increased complexity in repairing these vehicles.

OEM standards
Another repair challenge that continues is understanding what requirements are needed for each individual vehicle, Gotsch said. Keys-to-keys repair time has increased 1 full day industry wide, and more than 2 full days for non-drivable vehicles. Higher repair costs are leading to longer repair times — this includes more time needed to research repair standards, more parts to replace and more technology to understand and calibrate.

Customer satisfaction is also dropping as costs rise. However, a quality repair and fewer comebacks lead to higher satisfaction levels. Gotsch noted that consumers did report higher levels of satisfaction on longer and more expensive repairs when a shop was communicative about the process and what was happening with the repair.

She also said that as technology increases, shops should expect to see more pressure from the market to have OEM certification and a certain level of continued training.

In summary, CCC is expecting to see a steady level of claim frequency. People are buying more vehicles. Over time, ADAS will reduce frequency. Repair costs will continue to grow 2-3 percent annually. And the market will be driving the need for proper repairs.

“The market is a challenging market, but it also offers a lot of opportunity for those willing to make those investments moving forward,” Gotsch said.

About the Author

Krista McNamara

Krista McNamara is the former Editorial Director for the Vehicle Repair Group at Endeavor Business Media. She oversaw five brands  — Motor Age, PTEN, Professional Distributor, ABRN and Aftermarket Business World. She worked in the automotive aftermarket industry for more than 15 years. 

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