7 shifts defining collision claims in 2024
Both the number and intensity of claims increased in the previous year. Going into the new year, auto insurance companies, collision repair shops, and automakers faced a perfect storm of uncertainty due to these trends, an already overworked parts supply chain, and the unprecedented autoworkers’ strike. What impact will 2023’s occurrences have on 2024’s collision claims? These are the seven tendencies that OEMs, insurers, and repairers need to be aware of.
1. There are more and more claims filed. As of early 2022, there has been a 1% increase in collision claims. Car owners are still getting into accidents even though there are more Advanced Driver Assistance Systems (ADAS)-equipped cars on the road. An over dependence on ADAS technology and distracted driving are the causes of several of these collisions.
2. There is an increase in the average cost of repairable claims. Repairing a car properly and safely can be expensive depending on several factors. early 2023 saw an increase of around 8% over the first half of 2022 in the average cost of a repairable claim in the United States, which topped $4,700. Annualized growth typically ranges from 3% to 5%, therefore that is a significant increase. For the foreseeable future, anticipate annual growth of 8% to 10%.
3. More cars that are involved in collisions are probably going to be fixed rather than written off completely. We predicted at the beginning of the year that the value of secondhand cars would decline. Prices are still high in part because of the United Auto Workers strike and its aftereffects on inventory. Furthermore, the average price of a new car in the United States is expensive at almost $47,000. Because of these increased costs, auto insurers now have a higher threshold for total losses, which indicates that more collision-damaged cars are probably going to be fixed today rather than being declared total losses.
4. The slowly declining repairability will continue. The materials that car manufacturers choose to use are one factor in this. While aluminum body panels can be repaired, it is more likely that the crash energy from the collision caused a pattern of damage that makes a repair unsafe due to the panel’s material qualities. Of the items on estimate, 17.5% were repaired at the beginning of 2022. It reached 17.1% in 2023. The capacity to fix parts is also being hampered by ADAS, which is now a requirement for all new cars. Consider the existence of a millimeter-wave radar sensor concealed behind a bumper cover, for example. There might be less possibilities for the expert to fix it if the bumper is damaged. Many manufacturers demand the sensor be replaced to ensure it keeps working correctly.
5. Parts now make up a larger portion of the estimate overall. About 1% more pieces are on collision estimations now than there were a year ago. A rise in the typical number of parts utilized in each repair is partly to blame for this. In the past, adding one extra part per estimate required four to five years. Now, it requires roughly a year. The fact that a replacement item now costs about $275—an additional $75 over 2020—makes that noteworthy. Although it has decreased from its peak in 2022, inflation is still partially responsible for these growing expenses, especially for aftermarket parts. Single-digit price hikes for OEM and aftermarket parts are probably in store for this year. Nevertheless, a lot will rely on how the autoworkers’ strike plays out in the end.
6. From early 2024, anticipate a modest increase in the portion of parts budgets allocated to aftermarket components. The freight problems that occurred at the beginning of the pandemic are thankfully behind us. Parts inventories were affected by the disruptions in addition to other aspects. Inventory levels for aftermarket providers are stabilizing, despite the future of consumer transit being uncertain and depending on how companies handle efforts related to returning to the office in the long run. A quarter of a percentage point more was spent on aftermarket components in the first half of 2023 than there was in the same period in 2022, with 21.5% of parts dollars going toward them. Until early 2024, the slight growth should persist.
7. By the end of 2024, 40% of calibrations may occur. 17% of repairable autos in the US have regular calibrations. That percentage is expected to rise dramatically in 2024, maybe reaching 40% by year’s end and possibly 60% by year’s end. The typical model year of vehicles that can be repaired is one factor contributing to this. In 2022, it was 2015 for the first half. Imagine that it was 2016 in 2023. It will be genuinely revolutionary when we reach the point where 2018 becomes the average model year. Every single car made in 2018 and beyond has at least one ADAS technology, which makes recalibration after repairs more necessary.
Repair frequency and costs will rise as more OEMs want calibrations for a greater range of accident scenarios. As of right now, the average additional cost for all calibrations included in an estimate is $500. While this raises the cost of repairs, collision facilities that want to keep cycle time under control and bring the work in-house may find new revenue streams as a result.
Navigating the path forward
These trends make it evident that our sector will need to be flexible by 2024. For instance, insurers need to be ready from an underwriting standpoint given the anticipated increase in calibration frequency. Collision shops, on the other hand, run the danger of losing their profit margin to a sublease unless they make the necessary investments in the tools and training to do the work internally. Carriers might also be obliged to modify their rates to strike a balance between costs and profits, given the high average cost of repairs. Furthermore, vehicle body shops ought to consider utilizing technology to accelerate crucial stages in the restoration procedure, which can enhance productivity, decrease cycle times, and regulate costs.