In recent years, auto repair costs have slowly risen for auto insurers. This, unfortunately, doesn’t show any signs of stopping. The world of auto repair is transforming quickly. With the financial implications of covering rising costs of repair bills, many are left wondering what the problem’s main root is. From technology advancing to labour costs, the issue is proving extensive and complex. Let’s take a look at the impact of auto repair costs rising for insurers.
Labour rates a main driver for auto repair costs
A 2024 report by Enlyte and its subsidiary tech company, Mitchell shows that labour rates have become a main driver. Not only are parts for vehicles continuing to rise, but the complexity of vehicles continues to increase.
For the first half of 2023, insurers are looking at an average repairable claims cost in Canada of $5,044. This marks a 12% increase since the year prior. Ryan Mandel, Mitchell’s director of claims performance, believes that this may increase to $5,500 by the end of 2024. Enlyte finds that the dramatic increase in labour rates is one of the biggest reasons for these rising costs.
ADAS Creates a significant challenge for auto repair costs
“Traditionally, labour rates increase slowly. Much more slowly than the 7.5% growth we experienced in early 2023,” Mandel tells the Canadian Underwriter. This was referring to the U.S. data. “I expect that will be the case in the future for all labour operations, including frame and refinish. Combining this additional labour cost with inflation, ADAS (Advanced Driver-Assistance Systems) and the introduction of lightweight materials used in vehicle construction has created a significant underwriting challenge for insurance carriers,” he stated.
With this in mind, ADAS is expected to continue driving up the overall cost of auto repairs. This is due to ADAS being more common in vehicles every day. In particular, the radar, ultrasonic, LIDAR (light and detection ranging) and camera sensor technologies need thorough calibration and recalibration when being repaired. Common in newer vehicle models, these sensors go to extreme measures to help with the vehicle’s safety. These auto repairs can be expensive, from detecting driver drowsiness to avoiding pedestrians.
“Performing the calibration adds time and expense to a repair, especially when the collision facility does not have the tools or expertise to complete the work on-site and must, instead, sublet the work,” Mandel says. In Canada, the calibration frequency for vehicles repaired is 10%. In the U.S., it currently sits at 17%. This is expected to more than double by the end of the year to 40%. To add to the price of auto repairs increasing, electric vehicles have become increasingly popular in Canada. This is contributing greatly to the growth in repair costs, given that these vehicles are much more expensive to repair.
Price of rental car repairs to decrease
The good news is that insurers can expect a decrease in most provinces for the length of collision-related rental cars in the country. Nationally, the length of rental (LOR) sat at 15.5 days in the second quarter of the year, according to the latest data by Enterprise. This is a 1.3-day decrease in comparison to previous years.
However, Enterprise states that the length of the rental alone isn’t what’s bringing the costs down. It does not negate other systemic costs. Length of rental results for the second quarter of 2024 are significantly lower when compared to 2021. However, they are still quite high when looking at the bigger picture.
“With the complexity of vehicle repairs only increasing, for both internal combustion engine (ICE) and battery electric vehicle (BEV) models, the entire industry must play a part in insuring all collision-related businesses are aligned. Not just for procedural solutions, but to ensure our mutual customers receive safe and proper repairs, an excellent experience and peace of mind,” Enterprise wrote to the Canadian Underwriter.
Auto repair costs: Conclusion
At the end of the day, as vehicles progress and become more advanced, we will continue to see an increase in the prices of auto repairs. Remember to always drive safely to avoid accidents and give yourself, as well as other drivers, peace of mind as a driver. Additionally, it is crucial to have good auto insurance to back you up. Contact isure or request a car insurance quote today!
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