Sustainability in the motor repair industry

Rising repair costs are putting pressure on the motor insurance sector, with the latest figures from the Association of British Insurers showing that the current average private motor insurance premiums are 15% higher compared to Q1 2022 and continuing to rise. To address this, insurers must find ways to support the repair sector and make repairs more sustainable.

Under pressure

A range of different factors are pushing up repair costs. As well as rising energy prices, material costs have increased, especially as availability came under pressure during the pandemic and, more recently, the war in Ukraine.

Advances in vehicle technology, especially around safety features, mean there are fewer claims but, when they do happen, costs can be higher. Parts are more expensive, and the skills needed to fit them can also be in short supply. This is exacerbated by the fact that motor manufacturers are producing vehicles in smaller numbers due to supply challenges so there’s little standardisation around these new technologies.

The increase of vans and electric vehicles on the roads also affects claims costs. Vans take up more space in a repair shop, limiting capacity, while the safety measures required to repair an electric vehicle can also restrict the other work that comes into the garage.

There’s also a significant skills shortage in the repair sector. Brexit, the pandemic, and the ageing workforce mean the sector is shrinking, with the Institute of the Motor Industry predicting 160,000 vacancies will need filling by 2031.

All these factors mean that repairs take longer, pushing up the cost of credit hire and the claim generally.

Making repairs sustainable

Embracing sustainability can help to address some of these issues. As well as being the right thing to do from an environmental perspective, there are also benefits for customers, insurers, and repair shops.

The use of green parts, which are undamaged, non-safety critical components that have been salvaged from another vehicle, is a prime example of the work the sector is doing to make repairs more sustainable.

Depending on the part these can be often readily available, therefore the repair can be completed faster than having to wait for a new part to arrive. It’s also more cost-effective, with green parts costing up to 75% less than their newly manufactured equivalent.

These efficiencies mean insurers are doing more to encourage the use of green parts. For example, Allianz recently refreshed its fleet policies in March 2023, changing the wording so that, where appropriate, OEM green parts that aren’t older than the part it’s replacing are automatically fitted and guaranteed.

“Our customer feedback revealed that when fleet drivers reported a claim they didn’t know if they had the permission to agree to green parts fitment, this was impacting volumes and the positive impact we hoped to make,” explains Eibhlin Swan, head of claims customer delivery at Allianz Commercial.

Getting greener

It’s also getting easier for repair shops to source green parts. Integrated salvage and recycling company SYNETIQ offers a digital platform, MyGreenParts, which enables repairers to source parts quickly and easily.

“Our MyGreenParts platform gives customers access to over 200,000 quality used green parts,” says Sarah Hirst, clients and green parts director at SYNETIQ.

“We also offer a ‘ringfencing’ service whereby we identify in-demand parts and ensure they’re available for clients when needed. This has proven popular for fast-moving, OEM, non-safety-critical parts such as doors and bonnets, helping the motor repair industry tackle supply chain issues.”

The platform also enables companies to measure and report the emissions and carbon savings they have achieved by using green parts, which can support their own ESG reporting. For instance, by supplying green parts, SYNETIQ saved its clients and customers 4.36 million kilograms of CO2 in 2022 alone.

Further savings are possible too. Allianz estimates that if insurers increase repair-over-replace rates by two percentage points a year across Europe, almost 30,000 tons of CO2 emissions could be avoided – the equivalent of the annual energy consumption of around 5,100 households.

Sustainability is also becoming a key driver in other areas of vehicle repairs. As an example, AutoglassTM, the industry leader in windscreen repair, replacement and recalibration services, has invested in the latest windscreen repair equipment and repair resins to support its repair over replace policy.

This has significant benefits for the environment but also for customers.

“More of our customers have benefitted from reduced ‘vehicle off the road’ time,” explains Tim Camm, technical training manager at AutoglassTM.

“A repair can also be more convenient: a windscreen replacement may involve the customer taking their vehicle to a dedicated AutoglassTM site. There’s also evidence that early preventive action saves the windscreen for longer.”

Support network

Adopting sustainability also requires insurers to work more closely with their repair networks. The repair sector is under significant pressure, with challenges including new vehicle technology, rising costs and the skills shortage,

By recognising network members as strategic partners, insurers can help them face these challenges and adopt greater sustainability.

As an example, Allianz has introduced several initiatives to support its repair network. These include:

Support with training and development. New vehicle technology, for example electric cars, will often require new skill sets. Repair shops are also encouraged to work towards PAS 2060 Standard for Carbon Neutrality to demonstrate their commitment to sustainability.

Energy fee. Repair shops have seen their energy costs increase by as much as 300% over the last year. In recognition of this, Allianz offers an energy fee giving a flat fee for each repair to help with the increased cost.

Reduced excess incentive. To encourage the use of approved repairers, Allianz’s recently refreshed fleet policy offers a reduced excess as an incentive for customers that use its network. This is backed up with a warranty benefit and a lifetime guarantee.

Working with repair shops in this way is important to Swan. “We’re keen to support our network members however we can,” she says.

“This is key to delivering more sustainable repairs, which benefits our customers and our repairers as well as the environment.”

Informed decisions

While the transition to sustainability has many benefits, there are also plenty of unknowns. New vehicle technology presents challenges, both in terms of how it can be repaired but also from an underwriting perspective due to uncertainty around risk and potential claims costs.

All this uncertainty could add cost to both insurers and repair shops. For example, a lack of standardisation in new vehicles e.g. battery placement means that additional precautions are often put in place. This may mean considering implementing a quarantine area when electric vehicle battery repairs are needed or considering how an electric vehicle can be manoeuvred around the workshop for specific body repairs if the battery needs to be disconnected.

It can also push up the risk of a vehicle becoming a total loss.

“There’s evidence across the board that vehicles are being treated as a total loss when a repair could have been possible,” explains Darren Bright, principal engineer – automotive repair at Thatcham Research.

“With so much unknown risk, it is easier to go for a total loss, but this isn’t the best option for the insurer or the customer.”

More sustainable solutions

This drive to more sustainability means the insurance industry is also looking at other ways to make motor repairs more sustainable. More desktop assessments are taking place, enabling insurers to assess vehicle damage remotely rather than having to attend the site.

Work is also being undertaken to find more sustainable ways to deal with electric vehicle parts. For example, although it’s possible to recycle a vehicle battery, there’s only one facility in Europe. As shipping batteries there can quickly negate the CO2 saving, the insurance sector is exploring ways to recycle batteries more sustainably.

By working together, the insurance industry can ensure that it delivers more sustainable repairs for all vehicles, with benefits for motorists, insurers, repair shops and the planet.

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This article was adapted from an article by Allianz  which can be found here.