Repair costs & labor issues squeezing auto insurers

Rising repair costs coupled with a labor and skills shortage are driving up claims costs for auto insurers, according to RSM, which reported prices to repair vehicles increased nearly 5% during March 2022. This is more than double the average of 2.3% that was seen from 2016-2019.

CCC Intelligent Solutions, Inc. reported that rising prices for replacement parts have accounted for more than half of the increase in average repair costs during the past five years. Additionally, the average number of replacement parts need per claim has grown steadily, from 8.4 parts per claim in 2011 to 12.6 per claim in 2021.

On top of this, technology-laden vehicles also carry higher repair costs, RSM reported. For example, a windshield claim on a traditional passenger vehicle costs around $500, on average. However, the cost to recalibrate sensors and other technology, which are often located behind or in a windshield, adds another $1,000-$1,500 to the typical windshield claim.

As it stands, nearly 80% of collision repair shops in the U.S. are scheduling vehicle repairs out two weeks or more, according to CCC. However, supply chain snarls limiting the availability of parts is only part of the problem. As with other industries, repair shops are struggling to attract and retain workers.

The TechForce Foundation, a technician education nonprofit, projects the collision industry will see a shortage of nearly 20,000 technicians annually through 2030.

As a result, repair shops are raising wages and the heightened labor costs are being passed along in the form of increased labor rates. CCC reported many shops have approved rate increases of 6%-9%, which is contributing to rising repair costs.

Related:

• Allstate auto lines suffer as inflation boosts ‘all the costs’
• Inflation, rising catastrophe costs are challenging commercial property lines
• Customer satisfaction slides as auto insurance rates rise