Jim Loughran, CEO of e2e total loss vehicle management, recently provided a presentation on unlocking business efficiency and cost savings with innovation at the ATF Professional vehicle recycling conference.
As an industry, we know that approximately 25% of motor claims result in a total loss. There are, of course, many variables that are factored into the decision to determine a vehicle as ‘end-of-life’. The extent of the damage is fundamental but also the cost of repair and time to repair. A vehicle may well be deemed repairable initially, but if the repair process takes too long, costs increase and the reality of an ‘uneconomical repair’ becomes apparent.
OEM new parts availability and delivery times have been heavily impacted by the semi-conductor supply issues and post-Brexit logistics. Delays in sourcing parts have seen key-to-key times and the entire motor claim life cycle extending markedly. Associated credit hire costs have escalated in tandem. It stands to reason that for insurers, longer key-to-key times mean inefficiencies, increased motor claim costs and decreased customer satisfaction. And what of the effect on repair businesses?
Repairers are working on tight margins and need to keep vehicles moving through the workshop to maintain a healthy cash flow. Vehicles with partially complete repairs take up vital space and when log jams appear so does the associated failure demand. Everything takes longer, more customers call in more often, insurer claims departments seek more updates, vehicles are moved around more, mistakes multiply, rework escalates and costs and stress proliferate. A partially repaired car does not pay the bills. Safe to say, it’s bad news all-round.
There are many ways that salvage and automotive recycling partners can add value, reduce costs and unlock efficiencies. End-of-life vehicles are a valuable asset to insurers and the value of that asset needs to be realised quickly and efficiently to avoid adding lost opportunity cost. End-of-life vehicle value can be generated either by selling the vehicle on for repair, (assuming permissible salvage code), or by dismantling and recycling the OEM parts for re-use in motor claims repairs. Those salvage partners who are also automotive recyclers have the ability to remarket a vehicle at auction, or alternatively, the Authorised Treatment Facilities [ATF] and expertise to recycle its parts for re-use. e2e members deliver strong salvage returns through our auction site – salvagemarket.co.uk and all are ATFs, compliant with Environment Agency requirements, and follow dismantling protocols that see them accredited to the UK Standard for Reclaimed Parts by the Vehicle Recyclers’ Association.
They are able to respond proactively to market forces, providing insurer clients with options so that they can extract maximum value from the vehicle. Organisations that only remarket and sell vehicles for dismantling cannot.
Feeding reclaimed parts back into the insurance repair cycle not only helps to un-block the repair log-jam but is more ecologically friendly, supporting sustainability and the drive for carbon neutrality by reducing CO2 emissions. Enabling access to reclaimed parts will also reduce the number of vehicles being declared end-of-life due to uneconomical repair. This means the repairer has more vehicles to repair and can fulfil those instructions efficiently, reducing key-to-key times. More policyholders have a positive customer experience and retain their vehicles.
The insurer retains more customers, shortens motor claim life cycles and associated credit hire periods and reduces motor claims costs. Benefits all-round.
The next question has to be can technology and data assist a more joined-up and efficient approach to the use of reclaimed parts for the insurer, repairer and salvage/automotive recycling partner? In order to answer this, we first have to look at potential inefficiencies in existing systems and business processes. It’s a stark fact that every year, companies lose 20–30% of revenues due to process inefficiencies.
Inefficiencies have an adverse effect on the ability to deliver high-quality customer experiences and they confuse and frustrate staff, affect their engagement and motivation, and sometimes also contribute to burnout. Employee turnover increases, which increases human resource costs, and once again impacts revenues and profits.
Administrative and operational tasks are inherently repetitive and often suffer from inefficiencies. These tend to sneak into a process over time, especially during periods of business growth or rapid change when teams are taking on new tasks and responsibilities. Often there is little time given to reviewing the process needs, or whether the process is still needed! This is due to the nature in which tasks change through their lifecycle. At the outset, during the engagement of a new client or contract, processes are matched closely to the client or contract needs and often this is achieved with a high level of efficiency.
However, these needs change over time in an incremental manner; a small adjustment here and a little change there, stack up on top of one another to produce processes that become less and less efficient as time passes.
Obviously, we need to review our processes on a regular basis, but there is another element that impacts our ability to do so. ERP, CRM, Workflow, BI & MI are some of the common terms we see used to describe the applications that many back-office processes are embedded within. These applications are inherently customisable & flexible and able to encode our processes effectively at the outset, but as those processes evolve it’s no longer an easy task to modify the application to fit changing needs.
Our processes become application-constrained rather than customer-led. Processes embedded within applications become a liability rather than an asset.
On the surface, our IT systems and applications may seem slick, but how often are they reviewed against evolving client and market needs? The question we need to be asking is ‘Do my processes serve my business and deliver exceptional customer service or are my trusted applications constraining growth and success? Coming back to the FNOL claims decision to repair or total loss a vehicle; how might we as salvage partners better support our insurer clients in making informed decisions? Is there the potential to innovate and deliver a reclaimed parts eco-system that works end-to-end, feeding parts availability back into the insurer clients’ claims assessment process and the repairers’ estimating process at the front end? This would realise benefits to all parties involved in the claim: insurer, policyholder, repairer and salvage/automotive recycling partner.