With mounting vehicle repair costs and inflationary pressures, the use of reclaimed or recycled OEM vehicle parts is an obvious choice, not just economically but environmentally too. Therefore, why is it that their use still remains far from standardised and mainstream. Jim Loughran, CEO at e2e Total Loss Vehicle Management, questions why?
Motor insurers are expected to report a higher combined ratio in 2022 as they struggle with claims inflation and premium deflation. The cost of replacing and repairing vehicles continues to climb and the knock-on effect of extended claims life cycle, key-to-key times and credit hire costs due to delays in sourcing parts add to the commercial misery and all whilst delivering an underwhelming customer experience. Claims frequency, meanwhile, is increasing as it falls more in line with pre-pandemic levels. At the same time, insurers’ hands are arguably tied when it comes to introducing premium rate rises to offset mounting costs. In such a highly competitive market, where consumer buying decisions are predominantly driven by price, premium hikes are a surefire way to lose customers at a time when the cost-of-living crisis is already squeezing household budgets. Faced with this perfect storm, how can motor insurers reduce the impact?
Use of reclaimed or recycled OEM vehicle parts, which offer savings of circa 70% on retail prices for new OEM parts are an obvious win, and the derived CO2 savings support the environmental aspect of insurers’ ESG policies. Stocks of catalogued reclaimed parts, warranty assured and quality graded to the UK Standard, are available, stored and ready to be dispatched from centralised hubs and the individual warehouses of automotive recyclers across the UK. Unsurprisingly, it’s true that there has been an unprecedented increase in demand over the last 12 – 18 months. And yet, even though reclaimed parts clearly represent part of the solution to address the described perfect storm, their use still remains far from standardised and mainstream, with the exception of a few progressive motor insurers. Why?
The use of reclaimed and recycled parts is in itself becoming the driver of technological need. It stands to reason that companies that can make informed claim/repair decisions swiftly are the ones that will best ride this storm. Existing discrete and often regionalised arrangements between insurers, vehicle recyclers and repairs work well. The concerns arise when considering the ability to scale and fulfil escalating demand. The entire motor claims process, its associated technology and users need the ability to access centralised data on the availability, cost and location of reclaimed parts. An eco-system model allowing information exchange between all parties involved in the claim supply chain would enable parts availability and cost to be fed into repairers’ estimating systems at the front end. Currently, there are ‘point’ solutions available, but nothing that is joined up, offering an end-to-end seamless approach. And this is the challenge. If you break down the motor claims supply chain into its component parts, each has its own effective technology. The key to unlocking the maximum potential is connectivity between those discrete solutions.
But even more importantly, before addressing technological integration, the supply chain has to address process integration. Understanding the workflow from FNOL through to claim fulfilment will enable all parties, insurer, repairer and vehicle recycler to identify the pressure points and bottlenecks and re-engineer the process to better reflect today’s operating environment. Mapping out the workflow will provide the insight needed to identify how technology can be used to improve it. In short, it’s not just technology legacy systems holding back motor claims supply chain integration, it’s legacy processes.
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 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?
This article was originally published at www.postonline.co.uk