Collision Repair Delays In 2023
A recent whitepaper from a consulting firm has reported that delays in collision repair services, which began in 2021 and are still persisting in 2022, are unlikely to end in the foreseeable future due to a continuing shortage of repair technicians in Canada and the United States.
The Romans Group LLC reported that since the start of the pandemic in 2020 and continuing throughout 2022, the demand for collision repair services has outstripped the available technicians, causing an increase in the amount of work-in-process. This situation is expected to continue into 2023 due to the persisting labour shortage.
“It is not a matter of demand, but a supply side lack of [labour] availability.” said the report.
According to the report, the labour shortages and technician skill deficiencies have caused skilled repair technicians to seek wage increases, and they are expecting insurers to take this into account when they set their auto insurance rates.
As insurers have been raising premiums to cover their own increasing costs, the collision repair industry has been determinedly pushing for higher labour rates, even though repairers usually struggle to get wage increases accepted by insurers, according to the consulting firm's findings.
“[The collision repair industry] is hopeful that insurer premium increases will allow for their [labour] rate increases,” the report read.
The consulting firm predicted that the adoption of the claims process operating model preferred by insurtechs will lead to a slower collision repair process in 2023.
Insurers prefer to use aftermarket parts to keep repair costs down, while autobody shops prefer original equipment manufacturer (OEM) parts. This is because OEM parts often cost more and allow for higher profits on repairs.
Claims processing models are crucial to understanding the way insurtechs process insurance policy applications. These companies are increasingly using better models which is great news for insurers; however, this also creates a conflict between insurtechs and the OEM repair model. These two groups will likely be at odds for a long time.
The whitepaper suggested that the claims processing models used by insurtechs are becoming more and more aligned with the business economics preferred by insurance companies. However, this model is in conflict with the OEM repair model and is expected to have a lasting impact on the collision repair industry.
Insurance companies, which provide a major portion of the claims to repairers, typically prefer multiple-shop operators (MSOs) that can deliver reliable and standardized results repeatedly.
Additional findings revealed that the highest-ranked repair organizations in the Canadian markets are franchisors (Fix Auto and Driven Brands, respectively), followed by network and banner associations such as Collision Solutions Network, CarrXpert and Consolidated Collision Services.
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