Growth in gas prices will not hold back the growth of auto claims costs

Growth in gas prices will not hold back the growth of auto claims costs

Higher prices for spare parts and a shortage of technicians are among the factors that are likely to offset any reduction in vehicle turnover caused by rising gasoline prices. report published on Monday Intelligent solutions CCC.

The report says that historical data shows that rising gasoline prices have only a marginal impact on vehicle mileage, which is in line with a lower frequency of vehicle claims. When gasoline prices jumped 38.3% from February to July 2008, vehicle mileage fell 1.9%. Similar small recessions were also during economic downturns.

Based on the Energy Information Administration’s gasoline price estimates, total vehicle miles driven in the US are projected to decline from 0.4% to 5.1% in 2022. Gasoline prices are projected to decline but remain high in 2023, leading to projected declines in vehicle mileage. increased from 0.9% to 2.7%.

The CCC report said that due to social distancing measures put in place to slow the spread of COVID-19, many workers have moved to the suburbs and metro areas in the Southwest, where public transportation is more limited. Unemployment is also at an all-time low, while the rise of e-commerce has shifted commuter miles to commercial vehicles.

“The combination of these factors, plus the relatively small decline in vehicle mileage during past recessions, suggests that high gasoline prices and a possible recession are likely to have only a marginal impact on mileage driven and accident rates for the remainder of this year and beyond,” – the message says.

The report, written by senior director of analysis and analytics Susanne Gotch, notes several trends that increase the severity of the claims.

It is clear that the 9.1% increase in the consumer price index, measured at the end of June, will affect the amount of physical damage claims, the report says.

However, the automotive industry has been particularly hard hit by the price surge. Supply chain restrictions have made it difficult for manufacturers to meet pent-up consumer demand following the easing of COVID-19-related restrictions in the second half of 2020. New car sales declined to 15 million in 2021 and are projected to fall to 14.4 million in 2022. For comparison, between 2015 and 2019, an average of 17 million new cars were sold.

Automakers have focused on using scarce semiconductor chips in their most profitable models. This raised the average suggested retail price of new cars to a new high of $45,000. The report says that the consumer price index for new cars rose by 2.4% in the first half of 2021, by 9.2% in the second half and by 12.4% in the first half of 2022.

Car buyers have turned to used vehicles, leading to record sales of 40.9 million in 2021, up 10% from the previous year. The CPI for used cars and trucks increased by 20.7% in the first half of 2021, by 32.1% in the second half and by 25.8% in the first half of 2022.

“Declining used inventories amid healthy demand means used goods prices are likely to remain high for some time, even though growth has slowed from last year and could even turn negative in the second half of 2022,” the report says.

The cost of spare parts has also increased. The average price per part jumped 7.4% in 2021 compared to 2020 and rose another 6.4% in June 2022. These higher costs, combined with increased vehicle complexity, led to a 10.9% increase in repair costs in the second quarter of 2022 compared to the third quarter of 2021. This followed a jump of 6.8% the previous year.

To make matters worse, the shortage of collision resolution technicians has worsened over the past two years. Repair shops say a shortage of technicians is the main reason for long backlogs.

This shortage has led to an increase in labor costs. The average weekly wage of repair shop workers increased by 7.5% in the fourth quarter of 2021 compared to the same period of the previous year. This followed a 6.1% increase in the fourth quarter of 2020 compared to the fourth quarter of 2019.

“Given the higher cost of vehicles, parts and labor, and the marginal reduction in claims, it is likely that our industry will continue to suffer from increased losses for some time to come,” the report concludes.

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