Solera Canada


From the blog

Data dive: why betterments are better

Solera Canada’s Audatex Estimating makes it easier to record betterments and appearance allowances, which results in more accurate estimates and reduced average severity. The latest numbers back this up:  Audatex’s estimates are over three times more likely to have betterments, and twice as likely to have appearance allowances (compared to competitors).

Betterments and appearance allowances

From an auto insurance perspective, a betterment is the increase in value of a part as a result of an improvement.

Let’s assume a tire is destroyed in an accident. It was getting old, and its threads were worn down. So, the shop replaces it with a brand new tire, which is obviously higher-value than a worn one.

This is a betterment, and if the estimator records it properly, up to half the cost of the tire is added to the estimate. The other half is the above and beyond portion of the cost, which the policyholder rightfully pays for.

So on a $200 tire, only $100 would be included on the estimate, with $100 charged to the insured as a betterment. You could also have a situation where the difference between the two tires wasn’t huge, and the betterment is pro-rated at, say, 10%. The insured would pay $20, and the insurer covers $180.

Now consider if our tire was not destroyed, but only scratched. Since the tire is perfectly safe, the owner can agree to receive an appearance allowance for the unrepaired cosmetic damage. Rather than spending $200 for a new tire, the insurer pays an amount—say $100—directly to the insured.

What’s better about betterments and appearance allowances?

In both scenarios, the insurer only paid $100. If the betterment is missed, the insurance company would pay $200 for a new tire. In the appearance allowance case, if the option isn’t presented then the cost of repairing cosmetic damage goes on the estimate—which may end up being more than $100. Or the tire might get replaced anyway, resulting in the unnecessary cost of $200.

In other words, both betterments and appearance allowances result in lower estimate values. They also make for estimates that are more accurate since they more realistically reflect the true value of the part in question.

Our betterment and appearance allowance data

A five-quarter analysis demonstrates that Solera Canada has over three times the percentage of estimates with betterments, and had roughly double the percentage of estimates with appearance allowances.

Why the difference? Because it is so easy to record these two categories in Audatex Estimating, estimators and appraisers are more likely to put them on the estimate. And that makes for a more accurate and less costly sheet: fair for both the insurer and the insured.

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