Route to Repair - Low-cost Insurance

When choosing an insurance policy, it is essential to consider the minimum legal requirements for coverage and whether the policy will provide adequate protection for your assets. However, this consideration is often overshadowed by the desire for a lower price. But a cheaper policy may have limited coverage and fewer options when a claim is necessary.

Professional accident repairers aim to restore a vehicle to its original condition by using various methods due to the complexity of vehicle design and the wide range of tools and techniques available. The choice of the process can be a topic of debate, with different parties advocating for their preferred approach. Insurers aim to provide the correct Indemnity for the policyholder as outlined in the terms and conditions. At the same time, they are protecting the customer's rights.

When a policyholder sends a vehicle to a repairer, understanding the customer's expectations and creating a repair plan often involves considering factors such as items to be repaired, blending techniques, using new parts, retail labour rates, and adding additional necessary items. The repairer is responsible for structuring the process to provide indemnification for the policyholder. However, this can create tension between the insurer, policyholder, and repairer if the policy purchased fails to meet the customer's expectations. The repairer's approach may not align with the insurer's desire to control costs while still providing indemnification. Finding a balance between these different strategies can be challenging, as both the insurer and repairer aim to meet the customer's expectations. However, determining right or wrong can be subjective and based on the ultimate goal. The insurer's goal is to control costs to enable predictive underwriting models for future competitive pricing and profitability. At the same time, the repairer wants to achieve profitability and maximum benefit for the policyholder, regardless of costs, as the insurer indemnifies these.

Processing of claims can be a lengthy and expensive process for insurers, and each day can add significant sums to the overall liability reserves pot with additional human resources to resolve claims promptly. But, equally, it's a frustrating time for policyholders without the use of their vehicle or the uncertainty of time scales for the inconvenience a claim brings to their daily routine.

Insurers often control the repair process of vehicles through their centres or by working with CMCs (Claim Management Companies) and independent repair organisations that follow their repair system. The authorised repair system helps ensure quality and speed, lowering costs for repairs and claims. Insurers also interpret the Indemnity outlined in policy terms and conditions. In addition, they must abide by regulations the Financial Conduct Authority set. The approved system often involves volume discounts for labour, parts, paint, and materials. To be part of the system, repair centres require skilled, certified technicians and access to alternative replacement parts and operate to industry standards such as BS 10125. This system also helps speed up repairs by allowing pre-approved centres to proceed with repairs without further negotiation and conducting quality and process audits. These benefits policyholders by minimising inconvenience and improving the company's brand through service and claims experiences, often leading to higher customer retention at renewal. However, in recent years not all companies have passed on the saving they have achieved when another party is at fault. For example, where insurance or CMCs has negotiated a discount through their supply chain, they do not need to pass those saving on to the at-fault insurer enabling a process known as re-rate.

Independent repair centres may have manufacturer approval, which ensures that repairs follow the standards set by the manufacturers. However, this requires additional costs, such as higher labour rates and significant investments in specialised tools and processes specific to certain manufacturers. As a result, many manufacturer repair centres may need help participating in the cost model established by insurance companies approved repair systems.

Policyholders are responsible for contacting their insurers and setting the repair route process in case of a claim. However, this route is already set in many cases, especially for cheaper policies, so access to manufacturer-approved centres may be restrictive. It does,t mean Indemnity won,t be provided; instead, the indemnity provision will undergo a further process which may cause friction and delays.

Repairing the vehicle or, at minimum, assessing the damage to enable an informed decision on the indemnity provision limits is essential to controlling the overall claim cost, especially in non-fault and third-party claims, which can outweigh the repair costs by 4 to 1. Yet many repairers believe insurers focus on the repair costs at excessive levels, given that significant savings can come from within the claims process.

So why so much focus on the repair costs and the repair route? Simply because it's integral to the claim costs, especially with third-party capture and the ability to re-rate on non-fault claims. Control of the entire claim, including the repair, enables the insurer to focus on controlling the overall costs of settling claims and maximise returns on Non-fault accidents. However, in recent years due to parts, staff and skills shortages combined with the acceleration of in-vehicle technology and autonomous features, when repair processing takes time and is suppressed by rates, the entire claims process bears additional costs.

With the exponential growth of technology, new models, and Electric and alternative fuel vehicles, the route to repair requires a new line of thought. A process where the repair community can invest in infrastructure, equipment, training, and apprenticeships without hindrance from cost control or restrictive clauses in insurance policies.

All stakeholders must think differently about Indemnity and include environmental and sustainability options in the requirements to repair modern and legacy models, including adopting repair and recycling strategies. Repair costs are increasing due to economic factors and technology integration. However, overall claim costs could grow slower than repair costs by challenging the past dogma. In the future, ?claim frequency will fall due to safer vehicles and more autonomous features. The reduction in repairs will require more specialism which needs investment.

If all motor insurers were to assume an open strategy for repair placement, independent competitiveness would ensure a market balance to control the rising costs and repair strategies adopted. In addition, the knock-on effect would result in lower claim costs, uniformity and transparency.