Combating Claims Inflation in Motor Insurance

The average cost of vehicle repairs has increased by over 40% since 2018, leading to vastly inflated costs within the motor insurance industry. Here we discuss how insurers can adapt their approach to combat motor claims inflation, while delivering positive outcomes for their customers.

What’s causing motor claims inflation?

Motor claims inflation is being driven by a number of factors affecting the vehicle repair industry. These include disruptions within the global parts supply chain, high competition for qualified repairers, and rising energy costs.

All of these factors lead to higher operating costs for repair centres, which ultimately filters down to insurers who rely on their services.

Delays within the vehicle repair process

The motor claims industry is also facing significant delays when it comes to repairing customers’ vehicles post-incident. Supply chain disruptions, coupled with the permanent closure of many repair centres during the pandemic, are making it difficult for repairers to accommodate current demand for their services.

This means it often takes longer to get customers back on the road post-incident, requiring insurers to offer courtesy vehicles for longer periods – increasing credit hire costs.

How can insurers combat motor claims inflation?

Claims inflation in motor insurance

Combating motor claims inflation means evaluating your approach to deployment and operation of vehicle repair services. Here are some actions insurers can take to reduce the impact of claims inflation, and minimise vehicle repair delays:

1 – Promoting right-first-time service deployment

Right-first-time service deployment describes understanding and meeting vehicles’ repair requirements the first time around. This means collecting qualitative data in relation to vehicle damage, and communicating effectively with both customers and repairers to ensure the correct services are deployed.

Promoting a right-first-time approach gives insurers the opportunity to plan the necessary repairs, and review/control the costs before services are deployed. This helps to mitigate the cost of individual claims, as well as identify opportunities for alternative repair methods, such as using mobile technicians.

This approach can be achieved by enhancing your FNOL/incident reporting strategy, ensuring images/details of vehicle damage are captured quickly, triaged effectively, and used to inform repairer estimates. Utilising an eNOL (electronic notification of loss) solution can help you to achieve this by capturing qualitative, accurate incident reporting data through a mobile web-app.

2 – Harnessing green parts supply chains

Utilising ‘green parts’ can help to reduce costs, and mitigate delays associated with vehicle repair. This means expanding your supply chains to include recycled/second-hand parts, which can often be sourced more quickly and at less expense than off-the-shelf replacements.

In light of recent industry challenges, many insurers have already reviewed their policies regarding green and second-hand parts. This has allowed their repair partners to reduce delays in sourcing components, and bring replacement costs down – combating claims inflation.

The benefits of harnessing green parts stretch to all parties involved in the motor claims process – including reduced waiting times for customers, lower costs for insurers, and increased capacity for repairers.

3 – Utilising mobile repair for smaller fixes

For smaller repairs, deploying mobile technicians can be a cheaper and quicker alternative to on-site repair services. This can help insurers to combat claims inflation, while delivering a faster turnaround for their customers.

To make effective use of mobile repair, you’ll first need to strengthen your approach towards assessing vehicles’ repair requirements. This means using damage/incident data to identify which vehicles could be repaired by a mobile technician, as opposed to needing specialist attention at a repair centre.

This might include vehicles with smaller scrapes/dents, or non-structural damage, which likely doesn’t require dispatch to a bodyshop for repair.

4 – Modernising the vehicle repair process

Part of combating claims inflation means increasing the efficiency of ‘shop-floor’ repair processes. Modernising your repair equipment/technology ensures that even the most complex repairs can be conducted on-site, without the need to forward vehicles onto manufacturers or additional parties.

This means adapting repair centres to cater for newer vehicles, such as EVs and Hybrids, and the technology fitted to them. ADAS (Advanced Driver Assistance Systems) are fitted as standard on new vehicles, and require recalibration with specialist equipment after most repair procedures.

Investing in newer repair technology will allow you to bring processes like EV repair and ADAS recalibration in-house, reducing reliance on third-party specialists – minimising repair costs and delays.

In Summary: Combating Claims Inflation

Over the past five years, the average cost of vehicle repair has increased by over 40%. This has had an enormous impact within the motor insurance industry, leading to inflated claims costs across the board.

Claims inflation can be attributed to disruptions in the global parts supply chain, increased operating costs of repair centres, and difficulty hiring skilled technicians. These factors are also leading to significant delays getting vehicles repaired, further exacerbating the challenges for insurers.

Insurers can take action to mitigate the impact of claims inflation, including:

  • Promoting right-first-time service deployment
  • Harnessing green parts / aftermarket supply chains
  • Utilising mobile repair for smaller fixes
  • Modernising vehicle repair with new equipment / technology

With the cost of vehicle repair set to increase further by the end of 2023, it’s vital that insurers act to mitigate inflation by reducing the cost and timespan of individual claims.

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