Delays in collision repair services, which started in 2021 and continued into 2022, will not stop anytime soon due to an ongoing repair technician labour shortage in Canada and the U.S., a consulting firm reported in a recent whitepaper.
“From the beginning of the pandemic in 2020 and continuing throughout 2022, demand for collision repair services exceeded technician capacity…which resulted in high levels of work-in-process,” said the report by The Romans Group LLC. “We see this extending into 2023 due to the continuing [labour] shortage.
“It is not a matter of demand, but a supply side lack of [labour] availability.”
The labour shortages and technician skill deficiencies mean skilled repair techs are planning to pursue wage increases and are counting on insurers to factor this into their own auto rate increases, the report said.
Insurers have been increasingly raising premiums to cover their own rising costs. In concert, the collision repair industry is aggressively pursuing labour rate increases, despite the historically ‘difficult time’ that repairers often have when pursuing wage hikes with insurers, the consulting firm found.
“[The collision repair industry] is hopeful that insurer premium increases will allow for their [labour] rate increases,” the report read.
Plus, adoption of the claims process operating model preferred by insurtechs is expected to slow down the collision repair process in 2023, the firm predicted.
Insurers prefer aftermarket parts (i.e., parts made by manufacturers other than the car makers themselves or their direct suppliers) to keep repair costs down. But autobody shops prefer original equipment manufacturer [OEM] parts, which tend to be more expensive, so they can make more of a profit on repairs, according to an article on personal finance website The Balance.
Claims processing models used by insurtechs are increasingly in line with insurers’ preferred business economics, the whitepaper suggested. However, that model clashes with the OEM repair model and will continue to have an impact on the collision repair industry into the new year.
Insurance carriers, which make up a significant volume of claims to repairers, tend to favor multiple-shop operators [MSOs] that offer consistently predictive and standardized outcomes.
Further findings showed Canadian markets’ top-ranked repair organizations are franchisors (Fix Auto and Driven Brands, respectively), followed by network and banner associations, such as Collision Solutions Network, CarrXpert and Consolidated Collision Services.