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Letter to the Editor

Stats and Trends

What’s happening in and around the Collision Repair Industry - and what all this may mean for the future.

There are two types of trends that those in the Collision Repair Industry tend to watch. The first type tracks happenings outside the industry, which collision repairers, for example, cannot impact but that have an impact on the industry. The amount of driving that is done by U.S. motorists is one example.

The second type of trends are those directly impacted by collision repairers: customer satisfaction with shops, and cycle time trends, for example.

As the U.S. economy limps along, slowly recovering from the recession, INSIGHT this month turns its attention to both types of trends, looking to see what these stats can tell about the coming months and years.

Aging of the fleet

One factor in the rise of total losses over the last decade is that, overall, vehicles on the road today are older than they were a decade ago. In 1991, the average passenger car was 9.1 years old (8.8 years old when light trucks were added to the mix). In 2009, that average had risen to 10.6 year old (10 years for cars and light trucks combined).

Used vehicle pricing

Weighed down by SUVs, used vehicle pricing plummeted in 2008, reducing how much repair work could be done before reaching the total loss threshold based on the value of the vehicle. Fortunately, used vehicle pricing rebounded strongly in 2009, to above pre-recession values. They dropped again somewhat this past summer, but still are seen as more stable and still higher than a year ago.

Cycle time

Trying to get an idea of where you might stand in terms of cycle time? Statistics obtained from one multi-state shop chain showed an average cycle time of 8.1 days, keys-to-keys. Overall, the shops averaged 2.64 labor hours per-day per-job (“touch time”).

But clearly even within that chain, cycle time performance varied. The top 25 percent of these shops, for example, had touch times of 3.75 to 7.5 hours per day, and cycle times between 3 and 5.5 days.

Another set of stats, this one covering vehicles processed through the DRP of a Top 10 insurer, show that cycle time is improving. For drivable vehicles, cycle times through the first half of 2010 averaged 3.9 days, down from 4.2 in 2008 and 4.1 in 2009.

Improvement was even more dramatic for non-drivable vehicles. Granted, the average number of labor hours on these jobs had declined slightly, from 34.7 in 2008 to 33.3 in the first half of 2010. But cycle time for these jobs this year stands at 10.4 days, compared to 12.3 in 2008 and 11.2 in 2009.

Changing deductibles

According to CCC Information Services, 43 percent of collision losses in 2003 involved a deductible of $250 or less. Just over half involved deductibles of $251 to $500.

That percentage of low deductibles has fallen steadily. In 2009, almost 59 percent of collision claims involved deductibles of $251 to $500, and only 28 percent involved deductibles of $250 or less. Almost 13 percent of collision claims last year involved deductibles of more than $500, up from just 5 percent in 2003.

Number of drivers

One number that appears to have continued to grow through the recession is the total number of licensed U.S. drivers. It hit about 211 million in 2009, up from 205 million two year earlier. And there are a lot more younger (potentially more accident-prone) drivers among them. About 17.5 million teens are now eligible to drive, 8 percent more than a decade ago.

Vehicle miles traveled

Look at a chart of the total vehicle miles driven in the U.S., and it is a fairly steep and steady increase from 1979 until late 2007. While a decline in vehicle miles is common in recessions, the dip in this case was pretty severe.

The good news is that Americans are driving again. April of this year was the first month vehicle miles exceeded pre-recession levels. Analysts for a time thought that may be an anomaly, with declines in May and June. But July was again above pre-recession levels, and travel during August 2010 rose by a healthy 1.6 percent, an increase of 4.3 billion vehicle miles compared to August 2009. Though still slightly lower than the pre-recession total in August of 2007 (271.5 billion), it was higher than any other month recorded in 2007.

Based on the Federal Highway Administration's 12-month moving total, U.S. drivers have logged 2,987 billion vehicle miles over the past year, just 1.63 percent below the record high 3,037 billion vehicle miles reached prior to the start of the decline in November 2007.

Number of crashes

Perhaps no other statistic is more closely linked to the health of the collision repair industry than the number of crashes. As has been widely reported, the number of crashes in 2009 was down 306,000 from the previous year, a decline of 5.3 percent, according to the National Highway Traffic Safety Administration. Last year’s total was 8.6 percent lower than 2007.

But the Insurance Information Institute measures “frequency” a little differently, looking at the number of claims per “100 car years.” A car year is equal to 365 days of insured coverage for a single vehicle.

By that measurement, frequency climbed between 2006 and 2009. In 2009, frequency was 5.47 claims per “100 car years,” up from 5.34 in 2008 and 4.88 in 2004 and 2006. It remains, however, below the peak of 5.73 in 1999.

Average total cost of repairs

If your shop’s average ticket was down in 2009, you’re not alone. According to CCC, the average total cost of repairs in 2009 fell 2 percent to $2,409 last year, the first year-over-year decline in the last decade.

Part of that decline could be attributed to more use of alternative parts. According to Mitchell International, OEM parts currently account for 68 percent of total dollars spent on parts, down from 74.4 percent in 2007. Used parts have seen the biggest jump in that time, from 10.4 percent of the total in 2007 to 13.4 percent today. Use of remanufactured parts has grown slightly, and non-OEM parts now account for 12.8 percent of the total, up from 10.5 percent in 2007.

Repair costs are also down because of a dip in the total number of labor hours. Audatex compared labor hours for the first quarter of this year to previous years and found total labor hours were down .3 from 1Q 2008 and down 1.1 hours from 1Q 2008.

Total losses

CCC, Mitchell and Audatex all measure total losses a little differently, so it is best when looking for trends to track any one of the companies’ numbers over time.

CCC, for example, showed the percentage of vehicles being declared total losses peaking in 2009 at just over 14 percent (up from less than 9 percent in 2000). The good news so far in 2010 is that has declined slightly to 13.8 percent through the first six months of this year. That would put it about in line with 2007 and 2008.

Insurer loss ratio

One closely watched number among insurers is the loss ratio, the percentage of total premiums paid out in claims. (This percentage does not include loss adjusting expenses, the amount spent on handling those claims.) The industrywide loss ratio could hit 65 percent this year, according to Auto Insurance Report, up from just 64.3 percent last year, and a continued climb from the just under 58 percent loss ratio in 2006.

Part of that increase is accounted for by the fact that total premiums collected by all auto insurers has been flat or shrinking for several years.

But it’s also interesting to compare loss ratio by insurer. The better (the lower) the loss ratio, the more room an insurer has to cut premiums in order to gain market share.

State Farm often has the highest loss ratio, and last year was no different; at 72.9 percent, it was well above the industry average and even well above GEICO’s 66.9 percent, the second-worst among major auto insurers. USAA and Erie were the only other two major insurers with loss ratios above 66 percent last year.

At the other end of the spectrum, the Auto Club of Southern California had an impressive 51.6 percent loss ratio. Mercury General, another California-based insurer had a 54.9 percent loss ratio, the second best among the top insurers. Allstate, Farmers, Liberty Mutual, Travelers and MetLife all had loss ratios of 58.7 percent or better.

What Next?

No single stat or trend can serve as a good measure of what the collision industry can expect in the coming months or year. And the trends remain mixed. The continued shift toward higher deductibles forebodes more customer-pay opportunities but also more minor damage likely left unrepaired. The apparent rebound and stabilization in vehicle miles traveled should be great news for shops. And the slight decline in total losses, in part because of the increase in used vehicle pricing, is welcome, if not overwhelmingly dramatic news.   o

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