Escalating car repair costs – parts and labour
The cost of vehicle parts and labour for repairs has risen significantly, adding to the overall cost of insurance claims. A recent survey estimated that 72% of independent and dealer garages have experienced delays in getting parts since the start of the year.
In addition to these factors, the supply chain has been impacted by:
- The COVID-19 pandemic caused a backlog that is still present today as manufacturers experienced shutdowns. Even though lockdowns are over, the backlog it caused is still there.
- The labour shortage has had a big impact. Since the freedom of movement has ceased, it’s harder to find workers from overseas to fill vacancies, leading to a shortage of HGV drivers. In addition, importing parts can be more expensive now.
There are too many other factors to detail, including conflicts, cost of energy, and more technologically advanced components. Considering the scale of some of these issues, they are unlikely to be resolved anytime soon.
Rising prices of second-hand cars
Several factors have contributed to the inflation of second-hand vehicle prices. Your car is worth more, but so is everyone else’s, neutralising the benefit unless you’re considering not driving at all. This was driven by a decrease in the production of new vehicles, caused by COVID-19.
According to Auto Trader, the average price of a second-hand car has increased by 30% in the past three years.
Increased hire costs
Considering insurers use courtesy cars whilst a vehicle is in repair, the increased cost has had a knock-on effect on hire vehicles. Combine this with longer claims caused by other factors and this has become an even greater financial strain.
Rising car thefts
Car theft rates have rocketed by 40% in the first six months of 2023 with Range Rover models being prime targets.
This is in part caused by the supply chain issues and increased cost of parts which criminals can salvage, and is exacerbated by the number of keyless thefts. To protect against this, we’d suggest checking out this article about how to avoid keyless theft by Auto Express, linked here.
Impact of Electric Vehicles
Electric Vehicles have brought a new dimension to claims costs. Analysts suggest that claims are 25% higher for electric cars, and also take about 14% longer to repair than a diesel or petrol equivalent. Some reports also suggest that EVs or hybrids are more likely to be written off than their petrol and diesel counterparts.
Even if you don’t drive an EV, petrol and diesel motorists will still be having ‘at fault’ claims against EVs that make it more expensive.
Chances are claims costs will reduce with time, as garages become more familiar with EVs and the supply chain catches up to demand, but we are likely talking years rather than months for that to happen.
To no one’s surprise, the cost of living crisis and inflation by itself is not helping matters either. These escalating costs are all coming together to become a headache for motorists and insurers alike.
The end of dual pricing
In January 2022, the Financial Conduct Authority (FCA) stopped dual pricing, a practice where insurers charged new customers less than existing customers for the same cover. This was a positive step for loyal customers, but it has led to higher premiums for those who regularly shop around.
The reason for this is some insurance providers used to sell policies at a loss, hoping the customer would auto-renew at their higher renewal price in the subsequent years. It’s a practice known as ‘price walking’ which has rightly been stamped down on, but as a result the pricing models for significant parts of the industry have had to change.