With any savings that can be made in the motor market eagerly sought by insurers, what impact are possible savings through intelligent vehicle repair allocation having?
Extreme competition has stripped the fat from the bone of the motor insurance market. For the insurers operating in this ultra-lean space, any potential operational and efficiency savings are extremely valuable.
One particular area currently under discussion is the way insurers route their claims and how they direct damaged vehicles to the accident repairers in their bodyshop networks.
This is such a hot topic because insurers spend millions of pounds on vehicle repairs – so single digit efficiency savings quickly translate into large numbers on their bottom line. It is no wonder then, that when firms make claims of being able to save at least 5% of an insurer’s accident damage spend, the industry is keen to find out more.
Bonnie Parker, motor director at Cunningham Lindsey, says the traditional reliance on simply sending a vehicle to the nearest garage for repair is outdated. “I believe the majority of routing is still done on postcode,” she comments. “However, there are lots of systems that will allow you to allocate more effectively. You will be able to see the capacity of the bodyshops, you will be able to fit types of vehicles with the right bodyshops and it will allow you to determine how long that vehicle will be with that bodyshop.”
“Generally, insurers have a postcode region, and a bodyshop is assigned to each postcode region,” agrees Paul Sykes, sales and operations director at Audatex.
“What we are suggesting is, let’s ignore the postcode for a moment. If you are giving a bodyshop BMWs three, four or five times a week and they are taking longer to repair them, your cycle time is longer, the estimation process is longer and there are numerous inefficiencies. But when you give them a Ford Focus they are fantastic at it. The argument would be to give this garage more Fords and to give the BMWs to a garage that is good at repairing them.”
There is a danger that operating a postcode‑based model overseen by average cycle times and average repair costs does not give insurers the detailed level of data they need to make sure that every repair is being carried out as cost effectively as possible.
Yes, garages are meeting these average standards, but are they performing as efficiently as they could be? Is the estimation process quick and accurate, are the labour times tight, and are the parts costs reasonable? These are the questions insurers should be asking.
Some systems, however, are able to take the information insurers have on the garages they use to establish how efficiently each individual repairer operates. They do this by using proprietary algorithms that compare the performance of an individual garage against industry both best practice and also best value for the specific type of work being carried out.
“It gives you the ability to see (from a high level) where your problems are straightaway. You wash your data and there is a list of every single bodyshop, and you can see who is efficient and who is not. You can then design a strategy that tackles that inefficiency,” says Sykes, whose firm features one of these systems.
Savings of 5% in this space are being seen. Parker explains: “I would have thought that there is at least a 5% saving that can be made here, and that is in terms of the cost for getting the right people to do the right job and also in terms of productivity savings for the back office functions, phone calls, complaints and reducing vehicle off-road times.”
Parker says the approach Cunningham Lindsey takes means the firm can get a handle on the capacity at a particular garage – as well as its capabilities – and she says the loss adjuster has invested heavily in its technology to enable it to link in with the individual bodyshop management systems.
While insurers are keen to realise savings and give themselves additional breathing space in a market that is notoriously competitive, they are equally driven by offering their policyholders the sort of service they demand. Customer service is as much of a concern as efficiency.
This is a point that Simon Law, motor damage supply manager at Allianz, is keen to make. When discussing the savings possibilities that routing the right vehicle to the most appropriate repairer would have, he says: “I would like to understand a little bit more around how the system works and the rule set that is behind it because, for us, there is an element of asking, ‘how efficient is the bodyshop at repairing the vehicle?’ It might be that they are more efficient at some models than others – but that is only part of the story.”
This means there are also considerations about the way the work is carried out and how it meets the expectations of individual policyholders. Law adds: “What is the customer service like? Actually, while the system is saying they are efficient, is the quality of work where it needs to be? What is their cycle time like? There are a whole raft of things that fit into this. It is not about a single measure but a multitude of different measures that take into account individual customers’ wants and needs.”
Looking to the future, the insurance industry is keen to get to a situation where not only does the right car go to the repairer with the most appropriate skills for the job, but to a situation where the repair can be booked in when the insurer is speaking to the customer at the first notification of loss.
David Creswell, chairman for the Auto Body Professionals Club, says: “The Holy Grail that is being sought is that the insurance company can book the vehicle in over the phone. So, at FNOL, when Mr Smith is on the phone and needs his Vauxhall Corsa repaired, they can agree with him which repairer to use and book it in there and then.”
For this to happen there is still some work to do around integrating insurers’ systems with the various bodyshop management systems – and doing so in real time.
There are then questions as to whether accident repairers will be happy to provide this level of information to insurers, and whether they feel it might compromise their position to give such detailed data on their capacity at any specific time.
While the motor market remains incredibly lean, what is encouraging for insurers is that there still areas where improving technology and processes are opening up the potential for future efficiency savings.
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