Car Valuation and Repairs: Recent Impacts on the Insurance Industry

As technology advances and issues in the supply chain continue, the valuation of vehicles and the price of repairs are on the rise, leading to challenges for both insurance companies and car owners alike.

Increases in Valuation & Repair Costs

Technology Advancements

Over the last few decades, vehicles have continued to see more and more upgrades—newer materials, better fuel efficiency, advanced safety systems, improved navigation, and of course, the latest computer systems. All of these advances have an impact on repair costs, as parts tend to be more specialized, less interchangeable, and more expensive. In some cases, certain parts even require trained technicians and special instrumentation to replace.

Supply Chain Changes

In addition to technological advancements, changes in the supply chain have played a significant role in the cost of repair. According to Kelly Blue Book, “manufacturers built almost 2 million fewer cars last year than in 2019 (the last pre-pandemic year),” largely due to a worldwide microchip shortage, which continues. 

Since the pandemic, the automotive industry has seen:

  • More difficulty sourcing parts
  • An increase in the cost of parts
  • An increase in shipping costs

 

Impacts on Insurance Companies and Policyholders

Increased Total Loss

With parts being more expensive and more difficult to replace, and valuations at an all-time high, more cars are being deemed as a total loss. An example of this situation is repairing advanced driver assistance systems (ADAS). Repairing these systems is unique to every manufacturer and requires specialized certifications to correctly repair. Right now, many auto shops simply don’t have the workforce and/or expertise to repair specific makes and models cost-effectively. Overall, this both creates more work for claims departments and leaves policyholders in a bind—with market inventory low for new and used vehicles, finding affordable replacements is a huge challenge.

Rental Shortages

Most insurance policies cover rentals for a specific period while a vehicle is in the repair shop. However, with parts taking a long time to come in than usual, policyholders are left with a gap period between their rental coverage and their vehicle being back in driving condition. For insurance companies, this adds extra stress to the claims process, requiring extra communication and coordination with policyholders to ensure a pleasant experience. 

 

To make matters worse, rental car companies are facing a shortage of vehicles. Due to travel restrictions at the start of the pandemic, these companies sold off large portions of their fleet. But now with a resurgence in travel and higher demand from insurance companies, they are struggling to purchase enough new cars to keep up. As a result, the costs for rental vehicles are at an all-time high.  

 

Control Back in Your Hands 

Valuation and its impact on total loss is an industry-wide challenge. And unfortunately, it’s one none of us can change or control. Thankfully, while we don’t have control over the turmoil in the industry, we do have control over how we choose to run our businesses. 

 

It’s why, at Comsearch, we continue to innovate and find new ways to support our customers, so you always have access to quality solutions that save you time and money. At a time when your claims department is working hard to keep up with unpredictable demands, leaning on an outsourcing partner can be the most effective solution. 

 

Whatever your business needs, we’re always here to help. Reach out to have a conversation!