Major Concerns in 2022

Before the pandemic hit, people in the collision repair industry were most concerned about a lack of qualified employees and the growing complexity of OE repairs.

Those problems still exist, but now the crippled supply chain has been added to the equation. It’s a whole new world and scary in many ways, so how will auto body shops be able to navigate through these uncertain and troubled times?

Solid, carefully researched and highly relevant data can surely help everyone in this industry. Director/ Industry Analyst Susanna Gotsch from CCC Intelligent Solutions, Inc., is well-known for being the author of the company’s annual Crash Course since 1995, where she interprets the numbers and forecasts what is going to happen next. Gotsch’s historical perspective supported by data is invaluable for anyone who works in the automotive industry.

Gotsch set the table for this year’s report before diving into the numbers.

“It’s hard to fathom that we are nearly two full years into the pandemic, but one thing we know for sure: The natural pre-pandemic order of things has been altered, leaving us searching for a new normal or rhythm to how we live, communicate and conduct business,” she wrote.

Obstacles created by supply chain issues are a concern to every body shop in the world right now.

“Despite new variants and ongoing debates on how best to balance public health and economic well-being, the U.S. economy has roared back, with consumer buying things like cars, homes, furniture, electronics and other goods,” she said. “As a result of the increased demand, supply chains have been pushed to their brink, either from shortage of goods or people to deliver them. “Whether it’s the auto industry’s shortage of semiconductor chips or metals critical to development of electric vehicles, or the medical industry realizing many of the most critical drugs and supplies are only manufactured overseas, all industries are having to re-examine and restructure their supply chains.” The supply versus demand imbalance has also impacted U.S. inflation in a huge way, which hit a 40-year high in December 2021, Gotsch said.

“Labor shortages have also driven up wages across nearly all industries, with Conference Board data pointing to higher wages in 2022,” she said. “The disruption experienced over the last two years has accelerated the pace of innovation across all industries, leading to the transformation of how business is conducted as technologies such as artificial intelligence (AI), telematics, mobile and cloud are being adopted to help inform and speed processes, and combat challenges stemming from labor shortages, new consumer expectations and other market dynamics.”

The automotive repair industry is still struggling to find employees, Gotsch reported.

“Representatives from Universal Technical Institute predict a wave of retiring baby boomers will create 100,000 auto technician job openings over the next decade or so, with the Bureau of Labor Statistics projecting a 4% decline in employment in the overall auto technician field through 2029,” she said. “Finding technicians with the right skillsets is also a growing challenge as

Director/Industry Analyst Susanna Gotsch from CCC Intelligent Solutions forecasts that supply chain problems, inflation and repair complexity will continue to be major obstacles for collision repairers in 2022

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vehicle complexity increases.”

Most collision repairers indicate the technician shortage has been the primary reason for longer backlogs of work. Repair work is up as auto accident frequency has risen. Many shops have indicated they cannot repair as many vehicles at the same time as they did before the pandemic, the Crash Course said.

While repairers are seeing an increased number of non-driveable DRP repairs relative to the preceding two years, both driveable and non-driveable repairs are taking longer, and repairer productivity is lower.

“Unfortunately, as repair costs climb, repairer productivity can sometimes suffer, customer satisfaction can fall and the likelihood that the customer needs to bring their vehicle back for additional work after repairs completed also increases,” Gotsch explained. “And it’s not just repair time that is taking longer. The time to get an appraisal has increased for traditional channels where the customer either is visited by an insurance staff appraiser or brings their vehicle in for a DRP appraisal.”

Ultimately, the key to combat higher costs is to improve productivity, Gotsch outlined.

“Unfortunately, new vehicle technology such as ADAS and EVs have added increased complexity and requirements for new skillsets, training and tools for the collision repair industry,” she said. “So, while the industry has demonstrated its resilience and ability to adapt to new vehicle technology over the years, adapting takes time, and today’s environment means these repairs may cost more.”

A sharp increase in motor vehicle fatalities occurred in 2020 and 2021 in the U.S., highlighting the need for new directives to improve vehicle safety.

An estimated 20,160 people died in motor vehicle traffic crashes in the first six months of 2021, according to the NHTSA—an increase of 18.4% from the first six months of 2020, and the highest number of fatalities during the first half in 15 years, based on this year’s Crash Course.

The fatality rate per 100 million vehicle miles traveled increased to 1.34 for the first six months of 2021, versus 1.28 for the first six months of 2020 and 1.07 during the same period in 2019.

Fatal accidents either involving just one vehicle, speeding, illegal substances or failure to wear a seat belt rose disproportionately—underscoring how more drivers are more reckless than ever before. Some of those states with the highest fatality rate per 100 million vehicle miles traveled in 2019 are also those states experiencing the most growth in population.

What caused this lack of inventory in 2021?

“Extreme weather and cyber security were not the only challenges in 2021 that forced people and businesses to evaluate business models,” Gotsch wrote. “Many industries like the automotive industry had moved to a just-in-time inventory system prior to the pandemic—an approach that was sorely tested over the last year as consumer demand increased much faster than anyone had planned.

“Inventories had been drawn down from plants being closed at the outset of COVID, and then operating at lower levels of production while trying to balance employee safety and production demand,” she continued. “As industries scrambled to meet demand, they met the same challenges: Higher raw material prices, higher transportation costs from higher wages and fuel prices, record spot container shipping rates (14 times higher now than during the same period in 2019), more money and time to unload goods at shipping ports, and shortage of employees on site.”

In the P&C insurance and automotive sector, dealers, OEMs and aftermarket parts sellers have been operating with lower parts inventories, based on numbers outlined in the report.

“Demand for parts has rebounded faster than many of the parts manufacturers and distributors expected, leading to an increase of ‘out of stock’ from aftermarket or ‘backorder’ scenarios for OEM parts,” Gotsch said. “Even when parts are available, they may be stuck overseas where the issue is

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getting the parts from the warehouse to the ports, onto the ship and then unloaded and delivered to the U.S.”

Parts delays and challenges finding qualified technicians are the two primary reasons repairers have seen their throughput of repairs and productivity fall and repair times grow. CRASH Network in Q4 2021 reported 96% of shops surveyed were experiencing delays, and the national average scheduling backlog reached 3.4 weeks, versus the pre-pandemic Q4 average backlog of only 1.7 weeks.

Shops are focused more than ever on blueprinting the repair to identify parts needing replacement and delaying the start of the repair until all parts have arrived on site. This is leading to delays in the average days from estimate completion to vehicle in for both driveable and non-driveable DRP repairs.

In conclusion, supply chain disruptions, extreme weather, cyber threats and labor shortages are disrupting historical trends, and have also made pricing and reserving for insurance much harder.

Fewer commuters mean less traffic and fewer accidents.

“Nearly two years in from the early shelter-at-home orders and a sizable share of the working population in the U.S. is still working remote at least one day per week,” the report said. “Many companies have postponed plans to bring employees back to the office numerous times, even in a hybrid model. Research from the Federal Reserve Bank of Atlanta, Stanford and University of Chicago suggests nearly 40% of U.S. jobs can be done at home, and office occupation levels tracked by Kastle Systems continue to stay well below 50% across their 10-city average.”

With many vehicles traveling at faster speeds on less congested roads during the pandemic, vehicles in accidents were seeing higher Delta-v’s, with greater damage to both the vehicle and its occupants. Delta-v is a measure of a collision’s severity or force. Higher forces in an accident increase not only the damage to a vehicle but also the likelihood for occupant injury and more severe injuries.

The professional disciplines of accident reconstruction and injury causation have clearly established axioms. All other factors being equal, the following are true: increasing the severity of an impact, in terms of impact force, increases the amount of damage to a vehicle, and increasing the severity of an impact, also in terms of impact force, increases the risk of injury to the vehicle’s occupants.

According to a survey by Workplace.com, 37% of U.S. employees will be working remotely in 2022, according to Gotsch’s data, with between 29% to 39% of the time spent working in the U.S. possibly done remotely, with 22% of employees able to work remotely three to five days per week without affecting productivity.

With potentially fewer people on the road during rush hour, congestion levels may remain lower, and some of the auto claim trends experienced during the pandemic may become more permanent. Overall miles driven and trips taken might not see a significant decline, but more telework would still lead to fewer rush-hour trips, less congestion in urban areas and freer movement of remaining traffic.

This is important because the variable shown to be most highly correlated to vehicle accident frequency is a large number of vehicles on the same road at the same time— i.e., congestion typical of morning and evening rush hour traffic.

So, with miles driven recovering, but fewer during historic peak rush hour times, does automotive claims data suggest different driving patterns will continue in 2022 and beyond? Overall claim counts including comprehensive losses were up 9.6% in 2021 versus 2020, while non-comprehensive losses were up 10.2%.

The acceleration of repair costs is always a major issue for body shops nationwide. Gotsch’s report said in 2021, the industry experienced a much larger increase in repairable claim costs than in prior years. The average total cost of repairs overall for all repairable appraisals was $3,708, up 8% from 2020 and up 14% from 2019.

Growth in the average number of parts replaced per claim as well as more labor hours per claim largely account for the rise in repair costs.

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