The "total-loss crisis" may not be over, but the dramatic growth in the percentage of vehicles being totaled appears to have subsided.
That was the message all three of the major estimating-system providers brought to the Collision Industry Conference (CIC) in Palm Springs, Calif., in mid-January.
"Our data is showing is that after several years of fairly sharp increases, we have leveled out," said Susanna Gotsch, director of industry analysis and reporting at CCC Information Services Inc.
That very likely came as welcome news to the approximately 180 people attending the latest CIC, who may well recall the last time total losses were the topic of a panel discussion at CIC. In late 2005, Gotsch and others were reporting that the percentage of collision-damaged vehicles being declared total losses had doubled in just the previous five years.
Although there hasn't been much if any decline in the percentage since then, the estimating system providers said the good news for repairers is that the numbers don't seem to be getting any worse.
For example, Greg Horn, vice president of industry relations for Mitchell International, said that about 6 percent of passenger cars on which estimates were prepared in 2002 were total losses. It reached 16 percent in 2004, and has been stable at about 18 percent in 2005, 2006, and the first three quarters of 2007, he added. Light trucks show a similar trend, he said, with about 16 or 17 percent being declared total losses in the last three years.
Those numbers, Horn cautioned, do not include obvious totals in which an estimate was not prepared or uploaded through the Mitchell system.
Part of what has led to the leveling off, Horn said, is a rise in the actual cash value (ACV) of used cars, particularly of domestic and Asian vehicles. That value has grown at a faster rate than average repair costs, providing more of a buffer before a vehicle reaches total-loss status.
The percentages of vehicles being totaled vary a bit among the three information providers based on how they cut the data, but CCC and Audatex reported trends very similar to Mitchell's report.
Gotsch said her company's numbers show only a modest increase in the percentage of vehicles being declared total losses in 2007 (13.5 percent) compared to 2003 (12.1 percent). In 2007, she said, about 19 percent of appraisals written by insurance companies were total losses, as were about 6 percent of those written by shops.
Brian Grainger, director of product management for Audatex, said his company has seen a decline in total-loss percentages. It peaked at almost 17 percent in 2004, he said, dropped for the first time in eight years to 16 percent in 2005, and has hovered around 14 percent in 2006 and 2007.
"Going forward, we expect this trend to pretty much stay flat or increase slightly," Grainger said.
But Horn said the better news on the total-loss front doesn't mean the industry can turn to other problems.
"What we all need to walk away from here with is not that the total-loss crisis is over," he said. "It's still around a fifth of all cars in the U.S. involved in a claim. That's a huge percentage."
Some of the factors impacting the percentage of vehicles being declared totals are outside the industry's control, the panelists said. The market drives used-car pricing as well as salvage values, which have increased greatly in the past decade as salvage pools move online, finding buyers nationally and even internationally. The aging of the vehicle population also doesn't work in the collision repair industry's favor.
But automakers, Horn said, can help by trying to further limit the ancillary damage to instrument panels and windshields caused by airbag deployment. Honda's bundling of commonly used parts into lower-priced "collision kits" should be expanded, Horn said, particularly for lower-end vehicles in which every dollar can make the difference between a vehicle being repaired or totaled.
He said the fact that new frames used in repairing full-frame trucks can't be restamped with the original vehicle information number (VIN) also leads to more totals.
"If there was a procedure from the OEMs to figure out how to do a VIN replacement on a replacement frame, I think that would benefit the vehicle owner and the repair shop by helping putting that truck back on the road," Horn said.
Survey looks at expectations regarding parts
What are your expectations about delivery, warranty, return policy, and payment when you buy new OEM parts? How about with used parts or non-OEM parts?
Those are the type of questions the CIC Parts Committee is asking in its effort to establish some commonly accepted expectations for the various types of parts used in collision repair.
"The committee is not trying to endorse or legitimize any type of parts," said Ken Weiss, chairman of the CIC committee, during discussion of the results of the survey of about 70 people during the meeting in Palm Springs. "If you're a repairer and you want to use any of these parts, that's your decision. But what we're trying to develop through the survey is that when you order one of these parts, this is what you should expect."
The survey asked participants if they agree or disagree with various statements, and most generated very little debate. Virtually all survey participants, for example, agreed that no matter what type of part, vendors should be paid within 30 days unless it's agreed to do otherwise. Most expect parts to be delivered within 24 hours of order (48 hours for used parts) unless told otherwise at the time of order.
But some areas did seem to indicate a little less uniformity in expectations. About three in 10 repairers responding to the survey disagreed that any parts returns should be done within seven days.
And there appeared to be disagreement in how used parts should be priced. About one in four people responding to the survey disagreed that "price quotes should be for parts in undamaged condition" with "damage allowances negotiated at the time of delivery."
Weiss said the survey will be posted on the CIC Web site (www.CIClink.com) and that his committee will hold a panel discussion at the April 16-17 CIC in Philadelphia on the aspects of the expectations survey that seemed to have the least uniformity of opinion.
Other CIC news, discussion
In other news and discussion at CIC in Palm Springs:
- Kelly McCarty, owner of Carty's Collision in Ontario, Calif., announced that she is running for a seat in the California Assembly.
"I think it's really important that the collision industry finally have someone looking out for their interests in California," said McCarty, a Republican. adding that more than 75 percent of the voters in her Riverside County district in Southern California are registered Republicans.
John Benoit, the assemblyman for the district, is vacating the seat to run for the California Senate. McCarty will face at least one opponent in the June 3 primary election.
- Automakers have launched a new Web site, www.OEM1stop.com, o help shops find the OEM service and repair information Web sites. The site does not contain any technical information nor help shops find what they are looking for once they reach the specific automaker's site.
It is similar to the listings and links to all of the OEM Web sites already offered at the National Automotive Service Task Force (NASTF) Web site (www.nastf.org) and on the Web sites of many of the industry's associations. In some cases, however, the links at www.OEM1stop.com will get users a click or two closer to the login page of an automaker's Web site.
But the site is still not as complete as the NASTF listing; a half-dozen of the automakers, including Mazda, Subaru, BMW, and Audi, had not yet approved links to their sites from www.OEM1stop.com as of late January.
- Kenn Jarrett, AIG's Southwest Region Material Damage manager, discussed some of the benefits of what he called "claims compression," essentially a reduction in the amount of "touch time" an insurance claims handler has with a file.
Every phone call to an adjustor, Jarrett said, brings with it an average cost of $17, and a drop of one day in average rental car use saves the company $2.9 million.
Jarrett spoke during a CIC committee's latest presentation on its suggested "complete repair process," under which it believes the need for supplements and multiple parts orders are reduced by conducting more complete vehicle tear-down and estimating up front before any repairs begin.
Jarrett said insurers may resist such a system unless they are sure that proper images of the vehicle are shot before teardown so the insurer has what it needs to address issues of comparative negligence and bodily injury negotiations. He said insurers may also be concerned that shops' teardown of total-loss vehicles may result in loss of salvage value.