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Blog: Is it time to integrate the motor claims supply chain?

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In the face of inflationary pressures and rising motor repair costs, the use of reclaimed and recycled parts makes both economic and environmental sense. So, asks Jim Loughran, CEO at e2e Total Loss Vehicle Management, why isn’t more being done to scale this win-win solution?

Jim Loughran_CEO_e2e_portrait for CMS
Jim Loughran

Motor insurers are expected to report a higher combined ratio in 2022, as they struggle with claims inflation and premium deflation. The cost of replacing and repairing vehicles continues to climb, and the knock-on effect of the extended claims lifecycle, key-to-key times and credit-hire costs, which are due to delays in sourcing parts, adds to the commercial misery as well as delivering an underwhelming customer experience.

Claims frequency, meanwhile, is increasing as it falls more in line with pre-Covid-19 pandemic levels. At the same time, insurers’ hands are arguably tied when it comes to introducing premium rate rises to offset mounting costs.

In such a competitive market, where consumer-buying decisions are predominantly driven by price, premium hikes are a sure-fire way to lose customers at a time when the cost-of-living crisis is already squeezing household budgets.

So, faced with this perfect storm, how can motor insurers reduce the impact?

An obvious win-win is the use of reclaimed or recycled original equipment manufacturer vehicle parts, which offers savings of around 70% on retail prices for new OEM parts, with the added bonus that the derived CO2 savings support the environmental aspect of insurers’ environmental, social and governance policies.

Stocks of catalogued reclaimed parts, which warranty-assured and quality-graded to the UK Standard, are available, stored and ready to be dispatched from centralised hubs and the individual warehouses of automotive recyclers across the UK.

Increased demand

Unsurprisingly, there has been an unprecedented increase in demand over the past 12 to 18 months. Yet, even though reclaimed parts clearly represent part of the solution to address the described perfect storm, their use remains far from standardised and mainstream, with the exception of a few progressive motor insurers. Why is that?

The use of reclaimed and recycled parts is becoming the driver of technological need. Companies that can make informed claims and repair decisions swiftly are the ones that will best ride out this storm.”

The use of reclaimed and recycled parts is becoming the driver of technological need. Companies that can make informed claims and repair decisions swiftly are the ones that will best ride out this storm. Existing discrete and often regionalised arrangements between insurers, vehicle recyclers and repairs works well. The concerns arise when considering the ability to scale and fulfil escalating demand.

The entire motor claims process, its associated technology and users need to be able to access centralised data on the availability, cost and location of the reclaimed parts. An eco-system model that allows information exchange between all parties involved in the claims supply chain would enable parts availability and costs to be fed into repairers’ estimating systems at the front end.

Currently, there are ‘point’ solutions available, but nothing that is joined up, offering a seamless end-to-end approach. And this is the challenge. If you break down the motor claims supply chain into its component parts, each has its own effective technology. The key to unlocking the maximum potential is connectivity between those discrete solutions.

Process integration

More importantly, before addressing technological integration, the supply chain has to address process integration. Understanding the workflow from the first notification of loss through to claim fulfilment will enable all parties – insurer, repairer and vehicle recycler – to identify the pressure points and bottlenecks, and to re-engineer the process to better reflect today’s operating environment.

Understanding the workflow from the first notification of loss through to claim fulfilment will enable all parties – insurer, repairer and vehicle recycler – to identify the pressure points and bottlenecks, and to re-engineer the process to better reflect today’s operating environment.”

Mapping out the workflow will provide the insight needed to identify how technology can be used to improve it. In short, it’s not just legacy technology systems that are holding back motor claims supply chain integration – it’s the legacy processes.

A collective approach and appetite to better integrate processes and technology between insurers, repairers and vehicle recyclers is a prerequisite for progress. Encouragingly, conversations have already begun, including a recent meeting hosted by e2e, which was attended by representatives from the National Body Repair Association and Vehicle Recyclers’ Association.

Among the proposals discussed were:

  • The opportunity for insurers to contractually agree protocols with repairers that facilitate decisions on how they repair the vehicle, including the use of reclaimed parts, under a fixed price arrangement and without the need to refer back.
  • The development of an industry standard to evidence the CO2 savings derived from reclaimed parts.
  • The development of an insurance industry standard that provides clarity around why and when to use reclaimed parts.
  • The continued consumer education on the benefits of reclaimed parts.

Research is required to establish benchmarks and identify priorities, and steps are underway for cross-industry participation. The appetite to better integrate the motor claims supply chain unquestionably exists. So, if not now, then when?

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