There is a transformation happening in the auto claims and repair industries, marked by rising insurance and manufacturing costs, changing consumer behaviors, and automation revolutionizing legacy processes. We’re in a period of rapid change in the industry, and with no signs of slowing down, artificial intelligence (AI), machine learning, and other technology are fundamentally altering how we do business. For this reason, it is essential for leaders in the industry to understand these changes in order to navigate them successfully.
The impact of rising insurance and manufacturing costs
Over the last year, auto insurance costs have risen nearly 17 percent. While some of this surge can be attributed to inflation, it is imperative to recognize other influential factors contributing to the escalation of insurance premiums. Regardless, this is already unprecedented growth, and it’s only expected to increase further.
With more modern vehicles hitting the road, including a rapid increase in electric vehicle adoption, repairs are becoming more complex and thus more expensive. Post-pandemic, a resurgence in accidents due to a return of drivers to the roads has further contributed to soaring premiums.
Meanwhile, manufacturing costs are also ticking higher due to labor challenges, supply chain disruptions, and regulatory changes. This leads to more expensive parts, longer repair times, and more. Inflated manufacturing costs can also greatly impact the insurance claims process and the availability and affordability of policies.
In the face of mounting auto repair costs and subsequent premium hikes, automotive repair leaders must prioritize the streamlining of claims processes. By doing so, costs can be minimized, and customer satisfaction enhanced.
Shifting consumer behavior and aging vehicles
With insurance and manufacturing costs inflating at unprecedented rates, we are beginning to see a subsequent change in consumer behavior in two parts. First, as consumers anticipate an economic downturn, they are becoming more cautious with their spending, leading to a slowdown in vehicle purchases. In fact, from 2021 to 2022, auto sales dropped 8 percent - the lowest it’s been since 2011. Coupled with the increasing reliability of modern vehicles (the average age of a personal vehicle has increased gradually over the years to 12.5 years), the growing number of aging vehicles is undeniable and puts a strain on auto repair shops as the maintenance required is often more extensive than for newer models.
The second part to the changing consumer behavior is the rising popularity in digital services. Consumers are becoming more familiar with digital services, even coming to expect and demand them, especially from insurance companies. For example, an astounding 79 percent of consumers in a recent Solera survey said they would trust an insurance claims process powered entirely by AI.
To address this two-part challenge, auto repair leaders must implement a multifaceted approach. First, they must adapt their services to cater to older vehicles and invest in specialized training for their technicians. This will help set their workers up for success in a changing repair landscape. They should also offer comprehensive maintenance packages emphasizing the importance of regular servicing, especially for aging vehicles. This will help encourage repeat customers and build brand loyalty. Auto repair shops should also consider leveraging the latest software solutions to quickly diagnose mechanical problems and proven solutions to expedite mechanical repairs and alleviate bandwidth issues.
Labor shortages and automation
On top of increasing costs, changing consumer behaviors, and accelerating demand for repair and digital services, the repair industry is also facing a shortage of skilled technicians and mechanics. Open positions have been staying open for longer and hiring qualified personnel has become a close to impossible task. As a result, there is increased pressure on current workers, causing bandwidth challenges and burnout. And those lead to longer repair times and higher prices for customers.
To combat this issue, repair shops can explore the option of integrating AI solutions to create a bionic workforce, which means shops could empower employees with the tools to increase productivity and effectiveness.
Automation will not only help with bandwidth issues; it will also help body shops meet the rising consumer demand for self-service digital options and more technology-forward processes.
For example, body shops can use AI to prepare auto damage estimates virtually with the help of customers, providing good pictures of the crash damage to reduce the workload on the front office estimators and reduce the time from new claim assignment until repairs begin. Automation can also provide auto parts pricing directly into the estimate and even order the parts electronically to reduce time-consuming phone calls.
Futureproofing with technology
It is evident that the auto repair industry needs to adapt to stay competitive. And, as the industry undergoes pivotal changes and braces for an economic downturn on top of it all, it’s never been more important to embrace technology to future-proof your business. Investing in technology can help insurance companies grow their policy base in a tight labor market and will pay huge dividends in the long term. In fact, despite economic fears, now is actually a great time to innovate and experiment with your technology stack in order to discover what works best for your specific business needs.
Confronting these challenges begins with understanding customers' pain points, and surveying your customers is a great place to start. This can also help identify areas of improvement and home in on the types of technological upgrades needed to meet changing customer expectations.
If you have data analytics already, this is a good time to leverage those insights to tailor services and improve overall customer satisfaction. Now is also a great time to reevaluate the technology you have already implemented to make sure it’s still working for you.
Perhaps the most impactful, automation is transforming the claims process to help stay ahead of increasing demand and declining profit margins. By deploying automated systems for estimation, scheduling, and communication, repair shops can optimize operations, trim overhead costs, and bolster overall efficiency.
With companies in the space expecting big growth margins in the coming years, automation can also be used to offset the subsequent demand for labor to match this growth.
The use of AI in automation has also made it easier for body shops to save time and money. For example, if a body shop implements intelligent AI-powered estimates, they would need a less skilled person to kick those off before passing to a more technical person to move along. As a result, they could save money on hiring more skilled estimators and time putting those estimates together by hand.
Implementing mobile apps and online booking platforms can also make the repair process more convenient for customers, leading to increased business and customer retention. Another tool to help increase customer satisfaction and referrals would be modern diagnostic tools and repair equipment, which can enhance accuracy, speed, and quality of services.
Transformation to be continued
The auto repair industry's transformation, fueled by escalating costs, aging vehicles, and automation, is poised to continue its trajectory, amplified by the surge in electric vehicle adoption. As auto repair leaders, embracing technology is critical to future-proofing your businesses. By optimizing processes, investing in training, and adopting innovative technology solutions, you can navigate these changes successfully and thrive in an ever-changing market. It's time to seize the opportunity to innovate and experiment with your technology stack to ensure your auto repair shop remains competitive and ahead of this transformation to be continued.