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 ². 

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

Sustainability is also becoming a key driver in other areas of vehicle repairs. As an example, Autoglass^TM, 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.

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 benefits and a lifetime guarantee.

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.

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.