Ok, it’s not quite death. However, it is no secret that the passenger car—while not quite going the way of the dodo bird—is becoming unfashionable in the eyes of Canadian consumers. From a peak of over 900,000 car sales in 2002, there has been a drop of 350,000 units in 2018.
Conversely, sales of the truck category—which include light trucks, SUVs as well as commercial vehicles—has exploded. Since the millennium, the number of trucks sold in Canada has nearly doubled to 1.5 million units in 2018. In response, some manufacturers such as Ford have been significantly reducing their auto models while focusing on their truck and SUV offerings.
Stated another way, trucks now represent three-quarters of all vehicle sales.
Growth of light truck claims
So what does this trend-line mean for the auto claims industry?
Unfortunately, a lot. And not in a good way.
First, all those brand spanking new pickups and SUVs will not remain accident-free forever. Given the average age of a vehicle that’s in a collision is about five years, it takes some time for the newer vehicles to be reflected in claims stats. However, over the past four years, the proportion of light trucks (pickups and SUVs) has increased to nearly 50% of all repairable claims—with all the growth in this category coming from SUVs, which have increased from 29% to 35% during this time period.
More bells and whistles…
A second factor is the increased complexity of newer models. Unfortunately, complexity leads to more parts, which in turn leads to more parts that require repairing following a collision.
For example, looking at 2019 data, we can see that the gross appraisal values (GAV) and the number of replacement parts are higher for newer vehicle models. The increase in GAV is approximately 24% during this 4 ¾ year time period, well above the 7% CPI. The number of parts—which are a primary component of repair costs—has risen by 1.6 to nearly 13 parts per repairable estimate.
Thinking about the vehicle mix, although all three major vehicle classes require more parts to repair for newer models, pickup trucks are showing the largest increase. The difference between a 2014 truck and a 2019 model is 2 ½ parts, with the latter typically having nearly 14 parts on the estimate. This has implications for regions of the country that have high pickup volumes, particularly Alberta.
More costly total losses in the future?
Given the decline in car sales in Canada, it is not surprising that the proportion of totalled automobiles is also dropping. Unfortunately, costly SUVs are picking up the slack. Over the past four years, the percentage of total losses that were SUVs has increased four percent, offsetting the car decrease.
Not a huge number, except when one considers that the average totalled SUV has an ACV that is approximately $5,000 more than the typical car.
Based on the trend of more light trucks in the car parc and more complex vehicles, one would expect that gross appraisal and Total Loss values will continue to rise over the next decade.
Managing the trends
However, it’s not all gloom and doom. The promise of ADAS technology—particularly auto emergency braking (AEB)—may reduce frequency and potentially the severity of the collision. There are also a variety of tools that insurers can deploy to control repair costs.
For example, Audatex’s AudaTarget solution helps FNOL reps route the vehicle to the most cost-effective collision shops. The premise is simple—not all shops are adept at fixing all types of vehicle collisions—but the behind-the-scenes AI-based neural network technology is quite sophisticated. Irrespective of what’s under the hood, the results can be staggeringly effective, with up to 5% reductions in collision repair costs.
Alternatively, sophisticated parts quoting software such as APU, can help both staff and shops source the appropriate alternative parts in real-time within the natural workflow of the sheet generation. Proper parts selection can make the difference between writing off a vehicle—something the shops despise—and completing a standard collision repair, which results in a win for the shop and the insurer.
Finally, Audatex has a sophisticated data set of information and insights that can help both Underwriting and Claims plan for the evolution of the Canadian car parc and the collisions that inevitably follow.
For further information, please contact your account manager.