Accident Costs Go Up...Up...Up
A stressful environment surrounds fleet, and increased accident management costs are contributing to fleet manager anxiety.
To see Automotive Fleet's 2013 Accident Management Survey article, click here.
Accident management costs have once again increased. New vehicles, additional in-vehicle technology, advanced materials, and the rise in parts, fuel, and labor rates all have had an impact.
“Drivers of the cost increases include collision avoidance systems, the complexity of supplemental restraint systems, and increased use of exotic metals,” noted Stuart Braun, adjuster and maintenance supervisor at Fleet Response.
One example of a change in materials is the use of advanced high-strength steel (AHSS). “Vehicles are being manufactured with AHSS, which is very strong and lightweight, but has limited repairability and often requires replacement, consequently increasing repair costs on certain repairs,” Braun said.
PHH Arval also witnessed increased accident management rates, due in part to the rise of parts, fuel for shipping, and labor rates increases, according to Eliot Bensel, director, vehicle accident services and risk safey at PHH Arval.
Corporate Claims Management (CCM) has also seen costs rise slightly.
“I attribute the increase to a variety of sources: a slight uptick in labor costs as well as material costs and the price of fuel and petroleum products also contributed in many ways,” said Bob Martines, president and CEO of CCM. “EPA requirements are coming more in focus as well. Shop owners are much more focused in their efforts to write more complete estimates, which I believe is a direct result of the very flat economy making shop owners more conscientious of their bottom lines. In years past, shop owners did not worry about very minor costs for miscellaneous items. Now, they watch everything as each item factors in their profit margin.”
The increase in the average cost of repairing a fleet vehicle was driven, to a great extent, by a higher-than-average influx of new vehicles in commercial fleets.
Overall repair costs fluctuated greatly in 2011, increasing for some fleets and decreasing for others, depending on the fleet’s specific operating conditions.
Much of the repair cost increases were due to a higher percentage of newer fleet vehicles as a result of their replacement schedule. Newer vehicles lend themselves to more OEM parts usage, and, if the model has significant changes, alternative parts availability is lessened.
Increases in parts and labor prices were moderate, rising about 2 percent, while paint costs rose a little more quickly, at about 3 percent in 2011 because of higher oil prices.
Another factor is the continuing addition of expensive parts, such as computers, safety equipment, and plastics to reduce vehicle weight and fuel economy. As a result, the collision industry as a whole has increased the average number of parts that have to be replaced instead of being repaired.
There was a virtual “explosion” in the incidents of parts that need to be replaced versus repaired three or four years ago, as the number of hard-to-repair parts become more commonplace every year. At the same time, it’s becoming increasingly necessary to get electronic sensor codes reset after replacing electronic equipment, and this adds more to the cost of repairs.
It seems inevitable — accident repair costs will continue to rise due to vehicle content, materials, and rising parts costs. However, education and training are also a concern.
“Equipment and training costs more, therefore it is only natural that expenses incurred to stay current will creep into repair costs,” Martines of CCM said. “Labor and materials costs will increase, estimating programming fees will increase, and insurance is more important than ever to shop owners, so the cost will continue to play a role in the repair costs we all pay today and into the future.”
The Recovering Economy
While the economy is starting to recover, most agree it is a slow process, further impacting accident management costs.
The slow economy is continuing to put downward pressure on parts and labor prices, and continuing to make aftermarket parts more attractive. At the same time, it is forcing fleets to continue to find ways to minimize fleet expenses, which includes what they spend on repairs.
The credit squeeze is also showing up in signs of increased financial stress at repair shops. There has been a tremendous increase in requests from shops for earlier payment for repair jobs of $5,000 or more. These repairs involve big parts orders from suppliers, who are asking for faster payments from shops. It’s a sign of stress in the automotive industry at large.
The slow recovery is also causing an increased number of shop consolidations, decreasing the total number of shops in North America. “Increases in the cost of parts and service and associated fees, such as appraiser assignment due to increased fuel costs, have contributed to the rise in overall accident costs,” noted Bensel of PHH.
The national economy has caused some fleet managers to be very selective of what they are willing to repair. “But, as a whole, most fleet managers are repairing vehicle within their set accident management parameters,” Braun of Fleet Response said.
According to CCM, shop owners do not have the back log of work they used to enjoy. “In years past, booking a job two or three weeks out was something shops felt good about as the work would keep them busy at all times,” said Martines of CCM. “Now, some shop owners are either just filling the current week, or, in good situations, booking a week ahead.”
This unpredictability is causing some problems with staffing shops. “Most affected are the mid-size shops with eight to 12 employees. The smaller shops just tighten up by reducing overtime or hours, where mid-size shops actually cut employees,” according to Martines. “The larger shops are feeling the pinch as well, but still have enough financial strength to weather the storm a bit longer.”