Blog Is It Time to Join the Auto Damage Chain?

With inflationary pressures and the rising cost of engine restoration, using salvaged and recycled components makes economic and environmental sense. So, asks Jim Loughran, CEO of e2e Total Loss Vehicle Management, why isn't more being done to further develop this win-win solution?

Auto insurers are expected to report a higher combined ratio in 2022 as they battle claims inflation and premium deflation. Vehicle replacement and repair costs continue to rise, and the impact of extended damage lifecycles, key-to-key instances, and credit leasing costs stemming from component delivery delays are contributing to commercial misery while delivery correct is disappointing customer competence.

Claims frequency, meanwhile, is increasing as it is more in line with pre-Covid-19 ranges. At the same time, insurers' hands are probably tied when it comes to introducing premium increases to compensate for rising prices.

In such a competitive market, where consumers' purchasing decisions are largely determined by price, raising premiums is a surefire way to lose customers when the cost-of-living crisis is already crushing household budgets.

So in the face of this beautiful storm, how can auto insurers mitigate its impact?

A clear win-win situation is the use of recovered or recycled OEM single vehicle components, which offer financial savings of around 70% over retail prices of new OEM parts with the added benefit that the cost savings of CO2 derivatives support the environmental side of the business Insurer. Environmental, social and governance policies.

Stock of cataloged salvaged components with guaranteed warranty and British standard quality can be sourced, stored and made ready for dispatch from central centers and the personal depots of car breakers across the UK.

growing need

Unsurprisingly, over the past 12-18 months demand has seen an unprecedented increase. While salvaged items are clearly part of the solution to weathering the described perfect storm, their use remains far from the norm and mainstream, with the exception of a few less advanced auto insurers. Why is that?

Currently there are "one-off" options but nothing attached, providing a seamless end-to-end method. And this is the problem. If you break down the engine damage supply chain into its elementary components, each has its own effective expertise. The key to unlocking maximum potential is connectivity between these discrete solutions.

process integration

More importantly, the supply chain must manage the integration process before tackling technology integration. Understanding the workflow from primary claim notification to execution will enable all stakeholders – insurers, repair shops and auto breakers – to identify stressors and bottlenecks and redesign the process to better emulate today's operating environment.

Understanding the workflow from initial claim to execution will allow all parties – insurer, repairer and vehicle dismantler – to identify the pain points and bottlenecks and rethink the process to replicate the current framework.

The workflow map represents the information needed to determine how the technology can be used to improve it. In short, it's not just the legacy know-how systems that can contain car damage that enable chain integration - it's the legacy processes.

A common method and the will to further integrate processes and know-how between vehicle insurers, workshops and recyclers is a prerequisite for progress. Fortunately, talks have already begun, including a recent town hall hosted by e2e, which was attended by representatives from the National Body Repair Association and the Vehicle Recyclers' Association.

Proposals discussed included:

The ability for insurers to enter into protocols with repairers to give them easier choices about how to repair the vehicle, including the use of core parts, as part of a fixed value community and without the need for a referral. The growth of a normal industry proves the CO2 savings from salvaged parts. Improving a commercial insurance coverage standard that provides insight into why and when salvaged components should be used. Ongoing customer education on the benefits of salvaged items.

Research is needed to set benchmarks and identify priorities, and steps are underway for cross-industry participation. The need for food to better combine the automotive damage supply chain is undoubtedly there. So if not now, then when?