Insurance News
Repair Costs & Labor Issues Affecting Insurers in 2023
Highlights:
- Auto repair costs increased by 4.9% in March, more than double the average from 2016-2019.
- According to Crash Network (CCC Intelligent Solutions, Inc.), about 80% of collision repair shops in the U.S. schedule vehicle repairs for two weeks or more.
The insurance industry faces many challenges, including higher repair costs and delays in the time it takes for cars to be repaired. This is because there have been shortages in chip production, supply chain disruptions from flooding last year, and labor recruitment difficulties.
As per CCC Intelligent Solutions, Inc., more than half of the rise in average repair costs over the previous five years can be attributed to growing replacement part prices. Additionally, from 8.4 parts per claim in 2011 to 12.6 pieces per claim in 2021, the average amount of replacement components required per claim has increased considerably.
Motor vehicle production has been struggling to keep up with the demand. With the recent Russian invasion of Ukraine, many countries are now economically unstable, which will cause further supply chain disruptions and challenges inhibiting new vehicle production for years into the coming decades.
Additionally, with people returning to their pre-Covid driving habits, roads across the nation will witness a rise in accidents. With the shortage of parts for new vehicle production, auto-repair will see a rise in costs, fueling an increase in claims expenses.
Looking at data from CCC Intelligent Solutions, Inc., the average cost of a replacement car part increased by 55 in the first quarter of 2022 compared to the entire year of 2021, which saw an increase of 7.4%.
Furthermore, this increase is also supplemented by the rise in vehicle complexity which can demand specific types of replacement parts. These parts require a significant share of labor operations which is also declining. As a whole, this can make insurance companies increase their insurance rates.
However, not all insurers are increasing their rates. Companies such as Travelers, Progressive, and State Farm have reduced their rates as of May 2022.
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