CollisionWeek Exclusive | Q3 2012
Mitchell's Greg Horn: Industry Trends Report
Average repairable severity is up again, and Horn puts his finger on the cause.
In its recently released third quarter 2012 Industry Trends Report (ITR), Mitchell International's ITR Editor Greg Horn takes a closer look at the cause for the recent rise in average repairable collision severity, now exceeding $3,000 for the second consecutive quarter.
The Auto Physical Damage edition of the third quarter 2012 ITR features the article, "Parts Price Inflation is on the Move" by Horn, who found that the rise in severity can be almost exclusively attributed to parts prices, and surprisingly, it's not all part types driving the cost increases.
We sat down with Greg for a deeper explanation of his findings.
"We're not seeing an increase in paint and materials prices, we're not seeing an increase in labor rates, so what's driving the overall increase in average severity is parts," Horn said.
Horn explained, "When we looked at recycled parts, in just about a year's time, the index price went up from 89 points to over 112 points. So it's the fastest inflationary trend we've seen of any part type, and that, we think, is really driving the overall inflationary trend. So it's used parts. And we're seeing a little bit of an inflationary trend in aftermarket parts as well.
And the trend is more pronounced with the European brands, rather than domestic or Asian. The domestics' parts index is down, driven by parts matching programs, Horn theorized, and Asian brand parts are flattening, but "We're seeing European inflation rates are going on unencumbered," Horn notes.
Horn also points out that, despite the reports in recent months of the slow decline in used vehicle values, the collision repair industry is actually seeing an increase in the average ACV of repairable vehicles. In addition, the average age of the vehicles being appraised is getting newer. Horn suggests that this may also be putting pressure on average severity because, combined with the rise in average deductibles, the pool of cars with a claim made on them is affected by an "adverse selection" phenomenon.
Reprinted with permission from CollisionWeek (www.collisionweek.com)
Greg Horn, VP Industry Relations
Industry Trends Report
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