Maximum value from reclaimed parts is possible if there is a collaboration between the vehicle recycler, insurer and repairer. Jim Loughran, CEO of e2e Total Loss Vehicle Management, explains how this can be achieved.
The relationship between insurer, repairer and automotive recycler has historically operated in a linear supply chain model. But today’s market forces and dynamic operating environment suggest the time is right for change.
Insurers and repairers face challenges in rising costs, process friction, failure demand and poor customer satisfaction. Insurers are seeking to mitigate the impact of inflation in claims to remain competitive in the highly competitive motor insurance market. The effects of supply chain issues, including parts shortages, rising cost of materials and increasing repair costs compound the challenges. Delays linked to sourcing new parts and repairer capacity extend the claims life cycle, and associated costs, including credit hire, create a poor customer experience. Sustainability, meanwhile, needs to be factored into the claims proposition.
Brexit, pandemic-induced disruption, inflation, energy costs and manufacturing problems due to the crisis in Ukraine, are equally taking their toll on the repair industry, which is already stretched to capacity by consolidation, supply chain issues, staff retention and recruitment challenges and businesses leaving the market. According to the NBRA, parts availability casts a dark cloud over repair output. For repairers, parts delays lead to log jams, extended key-to-key times and cash flow issues, compounding the tight margins they work to. Adding to capacity issues, the strong value of used cars means cars which would formerly have been classified as a total loss are now economically repairable.
The opportunity exists to co-create an effective, tri-partite relationship, facilitating the flow of information and requirements between insurers, repairers and automotive recyclers. This would enable quality-graded, warranty-assured reclaimed parts, costing circa 70% of RRP, to enter the insurance repair cycle seamlessly. A reclaimed parts ecosystem can allow reclaimed parts cost and availability to be fed into the estimating process. Early intervention with real-time data informs claims decision-making, shortens claims life cycles, reduces costs, improves efficiencies and customer satisfaction, and gives repairers back control over their workflows. The icing on the cake is that reclaimed parts are more ecologically friendly, support ESG goals with sustainable motor claims and promote carbon neutrality.
Without question, the automotive recycling industry has worked hard to develop and support the reclaimed parts market. There has been significant investment across the industry in dismantling workshops and warehouse facilities, business infrastructure and processes, staff training, VRA accreditation to the UK Standard, delivery fleets and consistent efforts to educate and promote the benefits of reclaimed parts to all stakeholders. In order to fully realise the return on all this investment, we can go further. We can ask ourselves individually and collectively, what can we as automotive recyclers do to help facilitate a more joined-up and efficient approach to the use of reclaimed parts?
We can, of course, continue to make access available to the millions of quality-graded, warranty-assured reclaimed parts sitting on our inventories and deliver them speedily; but better integration and the development of a circular economy is where the future lies. We cannot make a step change towards this unless we can integrate forwards and backwards in the supply chain.
What is particularly interesting, and encouraging, is that there is plenty of technology to facilitate a reclaimed parts ecosystem. And, it is being used already, albeit in ‘islands of application’. One example is the use of Intelligent Vehicle Inspection by insurers. In this scenario, an insured party involved in an accident can download an App to their smartphone to enable them to film and send a video of their vehicle at the claim scene to help to inform their insurer’s assessment of the damage; assisting the decision to repair or determine the vehicle a total loss. Arguably, insurers would get more consistent results if the salvage and recovery agent, rather than the insured, undertook this task; but let’s set that aside. The real lost opportunity is not integrating this technology with the salvage agent’s reclaimed parts system that can immediately inform the insurer of the cost and availability of parts which could be used to repair the vehicle.
Convergence of technologies is what is needed, and the processes used by insurers, automotive recyclers and repairers have to enable that convergence. Currently, it’s fair to say that in the main, the processes used by all three parties are predicated by other drivers. Processes are designed and put in place by people, and attitudes are therefore intrinsic in process development. So we have to start with attitudes, and adjust the processes and only then will we be able to utilise the technology to full effect and unlock the commercial benefits.
As automotive recyclers, we can assist by seeking to develop closer relationships with insurers and repairers at an industry level to act as a catalyst for change. e2e believes that collaboration is the way to effect improved integration and to realise the maximum return on the investment that automotive recyclers have made, and continue to make, into the reclaimed parts market. A collective approach and appetite to address ways to better integrate processes and technology between insurers, repairers, and vehicle recyclers is a prerequisite for progress.
Encouragingly, conversations have already begun, including a recent meeting hosted by e2e and attended by representatives from the National Body Repair Association [NBRA], the Vehicle Recyclers’ Association, and I Love Claims. Early themes arising included the opportunity for insurers to contractually agree protocols with repairers that facilitate them in making the decisions on how they repair the vehicle, including the use of reclaimed parts, under a fixed price arrangement and without the need to refer back; the development of an industry standard to evidence the CO2 savings derived from reclaimed parts; the development of an insurance industry standard providing clarity around when and why to use reclaimed parts; continued consumer education on the benefits of reclaimed parts. Research is needed to establish benchmarks and identify priorities, and steps are underway with cross-industry participation. The appetite to better integrate the motor claims supply chain unquestionably exists, and if not now, when?