Monday, 27 June 2016 20:17

Auto Claims — The High Cost of Keeping Pace with Technology

The auto body repair industry has changed over the past few years in ways that far outpace the changes of the previous 25 to 50 years. Gone are the days of the ‘easy’ car repair—the days when a shade tree mechanic could go to the junkyard, pick up the necessary salvage parts.

Higher Repair Costs

The auto body trade is an investmentintensive industry. Investments must be made constantly in new technology, certification, and training. Body repair specialists require training and certification and they must constantly strive to keep their skills and training on the cutting edge to keep up with the everchanging technological and passenger safety improvements implemented by the automotive industry. All this training and certification requires investments of time, money and resources.

 

In addition to having the necessary skilled worker ready to work on a vehicle, when a vehicle needs repair, technical information that is specific to that vehicle and the repair must be purchased through long-term licensing or paid for by-the-hour. Then the information needs to be reviewed and processed as material updates are everevolving, meaning a technician can’t simply rely on what he learned last month, or even last week, about the technical details before beginning to repair the vehicle.

 

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The expenses for training and obtaining the technical specifications for a particular vehicle occur even before repair on the vehicle can begin. Once repair begins, there is the cost of parts. New metal alloys add cost to the repair process. With the new technology of part imprinting, parts are being produced with VIN identification recognition making parts specific to a particular vehicle, not just a specific make or model as in years past. Such an imprinted part would be incompatible with another vehicle thereby making a salvage part useless, maybe even dangerous to use, in the repair. Gone are the days when we could buy a used headlight to cut costs. To properly repair a vehicle, more expensive original equipment manufacturer (OEM) parts must be used. Additionally, special internal corrosion coatings and foams must be used as sound protection products. And every structural repair requires special adhesives and welding. Then, once the repairs are complete, paint and repair products require sufficient drying and curing time in controlled environments using up- to-date technical information and specifications that vary by automaker and often by sub-models. Using vehicle- specific parts, installed by a trained professional, makes repairs much more expensive than in years past.

 

Higher Disposal Costs

An expense area that hardly existed 25 years ago is the cost to properly dispose of damaged parts. Twenty five years ago, damaged parts removed from cars were hauled off to the junkyard or other disposal facility. That can’t always be done today. Various components in a damaged vehicle require special disposal – think about the various batteries, ballasts, and sensors in a car today – and reputable repair shops pay the requisite price to properly dispose of them. One area, for instance, that is often not considered is the cost to replace seatbelts. Most manufacturers require that seatbelts be replaced after a crash. These seatbelts often are considered hazardous and explosive waste that require special disposal, disposal which can be expensive. Some repair shops avoid this expense by not replacing seatbelts after a crash, thereby saving themselves money and avoiding the disposal process but possibly endangering the vehicle’s future occupants. Reputable shops follow manufacturer requirements and replace the seatbelts, thereby adding the cost of repairs and the costs associated with disposal to the cost of repair of the more obvious vehicle damage.

 

All these newer components and disposal requirements mean that repair of a damaged vehicle is not a haphazard wholesale, chain-store, or while-you-wait, transaction. To properly repair a collision- damaged vehicle requires highly qualified personnel with continuing education and training utilizing specialized equipment. This situation results in costs that far exceed the costs and training of years past. And these costs must be properly addressed to protect the owners of vehicles, their passengers, the environment and the repair facility.

 

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Finevector/shutterstock.com

 

Saving Money/Cutting Costs — Paying the Consequences

Insurance companies often seem anxious to save money where they can. In their attempts to do so, they sometimes seem to make short-sighted decisions that can impact them, and their customers, long-term.

First is the impact of trying to save money on the costs of repairs. When insurers try to unrealistically control the pricing of repairs, it encourages all repair companies to cut corners to save money—like not replacing seatbelts when the manufacturer of the vehicle requires it. This leads to shoddy and sometimes dangerous repair work.

 

Price Comparison of Replacement Side Mirrors - YearMake/Model - Item - List price (2016):

1995 Chevy Blazer - Side mirror, manual - $88.23 2001
Honda CRV - Side mirror, power - $287.58 2005
Ford 500 - Side mirror, power, with heat - $351.13 2012
GMC Yukon - Side mirror, power, folding, with turn signal - $483.40
2016 Lexus GX 460 - Side mirror, power, turn signal, camera, blind spot monitoring - $1,105.01

 

Post Repair Inspections conducted across the country are revealing how corners cut in the repair process by such shops are perpetuating a new breed of repaired vehicles that reclassified after repair as total losses. And when an insurance company requires that repair work be done in an ‘approved’ shop whose workmanship turns out to be shoddy, they may find themselves losing customers to other insurers who don’t require that repair work be done in such ‘approved’ shops.

The claims procedures and processes that were effective and efficient five, ten, or 15 years ago are not readily transferable to the vehicles on the road today.

 

Another area where insurers may be making short-term money decisions with potential long-term consequences is in labor costs. Currently there is a 40-60% disparity between the labor rates insurers seek to pay for autobody repair and the cost of mechanical labor rates. Such a disparity may lead entry-level technicians and potential labor to look to other trades for a career. This could result in a shortage of qualified employees and qualified shops in the autobody industry in the future. And anytime there is a shortage of supply, costs will go up. Will there come a time when insurance companies will pay $250/hour to repair body-damaged cars?

 

Ultimately, the insurance companies and the autobody repair industry pursue the same goal: a well- repaired, safe vehicle that a satisfied customer knows has been properly repaired. The task before us is to balance this goal with the realities of ever-changing vehicle technology, vehicle specific parts, expense controls and quality workmanship.

 

Bob Juniper owns and operates Three-C Body Shops, Inc., based in central and southern Ohio. Three-C, family owned, was founded in 1956. Juniper and Three-C welcome the new opportunities brought about by the changing face of the auto repair industry as consolidation changes the auto repair market in Central Ohio. Mike Orso is president of Nick Orso’s Body Shop and Service Center in Syracuse, New York. Orso joined the family-run business in 1973. Orso served as president of New York State Auto Collision Technicians Association, Inc. (NYSACTA).

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