Rob Smale, NED at e2e Total Loss Vehicle Management and ex claims director of Ageas, draws on his experience and reflects on the use of reclaimed parts in motor claims.
When I was a claims director I frequently drew upon the image of how my mum would have felt were she the customer whose claim we were handling.
Recently I found myself reflecting on my parents, and on some of the things, they did as a matter of course that to today’s eye look unusual perhaps. They started their married lives in a time of shortage when consumerism was not yet invented. They were well versed in what we now call upcycling and recycling when the only cycling they knew involved pedals. My dad had a shed that was packed with stuff that “might come in useful”. Mum never bought cleaning cloths preferring instead to reuse old clothes and towels. If something broke the first reaction was to fix it. If the fix involved an item from Dad’s shed then the triumph was all the greater.
With such influences perhaps it was fate that recently I became a NED for a company in the total loss vehicle management business. Our role is to support claims teams in the collection and disposal of total losses. As a claims director, I confess I rarely took much interest in this subset of motor claims. I had an excellent team of engineers who were experts and my only preoccupations were to make the process as slick as possible for the customer and obtain the best return we could. If I were still a claims director I would be taking way more interest in vehicle salvage as the opportunities for maximising returns and having a profound influence on a number of business areas have become significant. Total loss vehicles are no longer simply a source of scrap but now represent a goldmine of reclaimable parts whose efficient exploitation can have positive influences on results. It is my view that after a few false dawns this is the start of a golden age in the use of reclaimed parts. Mum and Dad Smale would approve.
The “Dad shed” that is the modern vehicle reclamation site is a highly ordered, clean and very efficient “dismanufactory” (made up word) that can provide high quality, original parts that with professional care and effort can be a bank of quality parts for vehicle repair. Catalogued and with impeccable provenance, the parts are chosen for their suitability and condition and can be rapidly deployed to forward-thinking bodyshops partnered with innovative insurers. The benefits case for reclaimed parts has been well rehearsed elsewhere. Of course, they number cost reductions for both insurer and repairer. For the insurer, the item part cost is reduced. OEM reclaimed parts can cost 60-70% less than the retail price of the equivalent part. As an example, a new bonnet at retail price for a Ford Focus is circa £250; the equivalent OEM reclaimed part is circa £100. For the repairer, the cost and time associated with the fitting of reclaimed parts are often less than for the out of the box new part. The use of reclaimed parts can make it economical to repair a vehicle rather than total loss it. This means more work and repair revenue for the repairer rather than the circa £75 handling fee for a total loss vehicle. The strategic use of reclaimed parts can positively influence other factors such as the speed of repair and the all-important key to key time. The speed at which the part can be sourced further reduces the potential total loss bolt-on costs of storage and credit hire for insurers and boosts speed of vehicle turnover and productivity in the body shop.
Unsurprisingly then, demand for reclaimed parts is growing. At over 5 million, e2e has the largest stock of warranty assured reclaimed parts in the UK and has seen a significant increase in insurance-related parts requests.
There has been discussion over the reliance of the auto industry on sourcing parts from all over the world, especially China. Supply chains have been shown as vulnerable to political change like Brexit and to disruptions such as the Coronavirus emergency. We have seen companies resort to shipping keys from China in suitcases to maintain production. Insurance companies are all about managing risk. If I were still a claims director I would have added parts supply chain disruption to my risk register and I would be seeking mitigation of the risk from a reclaimed parts strategy.
Risk registers are mandated in the regulated insurance market. To be effective the management of risk has to be embedded in the day to day operations of the business. My attitude was that each new or reimagined risk we considered was an opportunity or a threat. A threat if risk management wasn’t fully embedded as it would have the effect of adding costly demand into a process. Alternatively, an opportunity to improve processes if done in conjunction with the application of lateral thinking. So reclaimed parts represent a sensible mitigation against supply chain disruption.
My final thought on reclaimed parts concerns the environment. Mum and Dad Smale recycled because they didn’t like waste. Today we understand that the unsustainability of our way of life makes the reuse of valuable resources an absolute priority. Insurers who embrace reclaimed parts have at their disposal a fantastic story for staff and customers. A reclaimed parts strategy deployed via the claims team will, I believe, provide greater satisfaction and brand pride than any “bring your own cup to work” initiatives. If in caring for the customer following an unfortunate accident there is also the upside of returning valuable assets into use, now that’s a story claims teams will enjoy telling and customers hearing.