Car repair costs are going through the roof as a result of new technologies. Assuralia and repair networks have mapped out the evolution of repair costs. What is causing these high repair costs? And what impact does this have on your firm and your insurance premium? We would be happy to help you develop a more modern fleet policy.
Figures from Assuralia show that the overall cost of repairing a car rose by 17% between 2006 and 2016 (see table). According to the Belgian professional association of insurance companies, prices of car parts have increased by almost 30%, while the cost of products used for replacing or repairing a car part has gone up by 32%. It is also worth noting that the average time taken per repair has decreased by 15%.
Innovation Group – responsible for around 500,000 repairs in Europe each year – has identified even bigger increases in the cost of car parts. Between 2009 and 2017, the cost of a bumper increased by 35%; the price of a windscreen went up by 30%; and both headlights and mirrors have become 106% more expensive (see table).
These price increases were confirmed by a survey of the biggest car insurers in Belgium conducted by Vanbreda.
The price rises have a number of different causes:
- The increase is particularly noticeable for more recent vehicles in which almost every component makes use of modern technology. Just think of the sensors, cameras and radar equipment built into bumpers, mirrors, door handles and windows. This means that the price of parts is higher for new vehicles than for older models.
- What’s more, parts like bumpers, for example, are designed in such a way that lights, fog lights and sensors come built in as standard. According to Peter Verbraeken, CEO of online claims platform Ubench: “Bumpers fitted with sensors prevent all kinds of claims. On the other hand, cosmetic damage such as a dent in the bumper now often results in the entire bumper being replaced, together with the lights, fog lights and sensors. More complex vehicles mean more specialised repair providers, and therefore a higher price tag.” Excessive repair costs also mean that cars from cheaper ranges are often more likely to be written off after an incident.
- A second key factor is the increased use of aluminium instead of steel in vehicle bodies. The use of steel fell by 10% to 80% between 2009 and 2017. Meanwhile, aluminium use increased from 3.5% to 14% over the same period, even though it is a good 30-35% more expensive.
- A third aspect is the relation between salary costs and the labour hours required to repair or replace a part. The use of new materials and techniques means that it is possible to work more efficiently – but although the average time taken per repair has decreased, the cost of a repair has nonetheless risen. This is because the average hourly rate has increased by one fifth.
- Changes in legislation, stricter health and safety standards and environmental policies also have consequences for the cost of repair or replacement. For example, water-based paints are now applied more often in order to reduce the use of harmful solvents; however, this has led to an increase in the price of these products.
- According to Innovation Group, the market for (sub)suppliers of car parts is relatively restricted, which pushes prices upwards. In addition, suppliers are increasingly working with foreign car manufacturers. The geographical expansion to Asia in particular means that transportation costs have risen by 30-35%.
As well as the overall increase in repair costs, the 2017 annual report from the VIAS Institute shows that the number and the seriousness of claims submitted remains considerable. Generally speaking, serious claims also translate into high damage costs.
Repair costs and damage costs have a major impact on the total losses incurred by your firm, and therefore on your insurance premium. As a broker, our job is to keep our clients’ losses under control. We do this mainly by focusing on prevention and by proposing alternative repair methods, such as Smart Repair. You can find more information about Smart Repair here.
Car insurers are also confronted with the evolution of increasing costs for car parts and repairs. Likewise, customer retention is high on the agenda for insurers, so it is important for them to keep their car insurance premiums under control too. That’s why they are throwing their weight behind efforts to prevent car manufacturers from imposing further price increases.