17 Dec 3 Trends Making Claims More Costly and Time-Consuming For Fleets in 2020
Experts from Fleet Response identify changes in subrogation and repairs that will put more pressure on fleets.
• Automotive sensors and relays continue to raise repair costs and increase cycle times
• Windshield replacement requires an extra step in vehicles with Advanced Driver Assistance Systems
• Subrogation grows more competitive as insurers chip away at outbound payments
More Safety System Sensors
Five years ago, any of the cars and light trucks in your fleet probably contained 60 to 100 sensors, relays, cameras and lasers. They supported various safety systems, from anti-lock brakes and traction control to back-up alerts and blind-spot warnings.
Today, vehicles have more safety systems, and the number of high-tech components that support them is probably closer to 200, according to MEMS Journal, which serves the micro-electro-mechanical systems industry. Some of these are mounted beneath bumpers and behind grills, while others are embedded in exterior moldings, side-view mirrors and taillights – all vulnerable to accidents.
When a vehicle is damaged, any of these devices that might have been compromised needs to be replaced and calibrated.
“Most shops in our network do much of this themselves. But depending on what’s necessary to get the systems reset, some have to be sent out to a dealership,” says Stuart Braun, Adjuster and Maintenance Manager at Fleet Response. “It takes coordination to get the vehicle transported, flashed and then back to the shop. That adds cycle time and cost – maybe half a day and $200 to $350.”
But it’s necessary to return the vehicle to the manufacturer’s standards, and instances of repair shops glossing over the scans should be rare by now.
“The manufacturers have been pushing the importance of scanning and calibrating these systems as part of the repair, and the training has been out there long enough that there’s no excuse for not getting it done,” Braun says. “At Fleet Response, we capture pre- and post-scan results so we can verify that it’s being done.” [Related article: Ways to minimize ever-increasing repair costs]
More Costly Windshield Repairs
Compared to body work, replacing a cracked windshield as still fast and easy. But not as fast and easy as it used to be. Advance Driver Assistance Systems (ADAS) such as lane departure warnings, adaptive cruise control and collision avoidance all involve cameras that look through the windshield. If the windshield is replaced, they need to be calibrated.
Some systems need to be calibrated dynamically – that is, with the vehicle moving. It adds about half an hour of time and labor to the repair.
Other systems require static calibration, with targets set up around the vehicle while it’s in the shop. Figure an hour or two of time and labor.
“You need a certain amount of square footage and proper lighting to conduct a static calibration, and not all shops are able to create this environment,” Braun says. “So it’s another process where the vehicle may need to be transported.” As a rule of thumb, Braun says calibration will add $200-$350 to the price of replacing a windshield. In some brands, he’s seen the total cost as high as $2,500 to replace a windshield and calibrate the affected devices.
A class of businesses that provide automated claims management services promises to help insurance companies close subrogation files faster and reduce payouts. But they’re making it harder for the other side to collect fair compensation from the at-fault party.
“The estimates these companies provide only consider the cost of repair; they don’t look at personal property costs, reduction in value and the cost of rentals or lost productivity,” says Megan Aloisi, Subrogation Manager at Fleet Response. “They tell their clients – the insurance companies – that these things will need to be negotiated separately.”
Instead, many insurance companies present the repair estimates as the total payment offer.
“There’s room for debate over how many hours a repair is going to take, but just ignoring the other factors doesn’t mean they aren’t a legitimate part of the claim,” Aloisi says. “And if you don’t accept their offer, it goes back as non-agreed and starts a whole new process that’s harder to resolve. It creates an environment where there’s less transparency and accountability. There’s no single source who has all the data and authority to negotiate a claim.”
Two other techniques that make subrogation more competitive are:
Chipping: A line-by-line effort to work down reasonable repair costs. They might include using aftermarket parts, cutting estimated hours of labor, or finding the cheapest part available even if it’s on the other side of the continent.
Dropping a check: When the at-fault party’s insurer sends a low-ball payment before a subrogation demand has been made or negotiated.
“These practices create a choice of sacrificing dollars for days,” Aloisi says. The average subrogation cycle time in the auto insurance industry is around 100 days. At Fleet Response we’ve typically been well below, according to Aloisi – but creeping upward as a result.
“I’d like to think we’ve created an environment where they know when they see Fleet Response on a claim that we’re not going to roll over.”
“I’d like to think we’ve created an environment where they know when they see Fleet Response on a claim that we’re not just going to roll over. We document every aspect of a payment demand and we take whatever time is needed to get back the full recovery,” she says. “It lengthens our cycle time but it doesn’t change our aggressiveness to getting the full payment due.”
[Related article: 5 ways to improve your subrogation return]
To discuss how Fleet Response can make the most of your claims management processes, contact Jodie Varner, Vice President of Client Engagement at Fleet Response, firstname.lastname@example.org.