As I’m sure you’re aware, costs are rising across all industries and labor shortages are accompanying them. Because of this, the rising repair costs and labor shortages are raising claim costs for auto insurers up to nearly 5% as of last March. This is more than double the average of 2.3% last seen in 2016-2019.
The collision industry is experiencing significant challenges due to a shortage of skilled technicians. According to the TechForce Foundation, this industry will face a shortage of approximately 20,000 technicians per year until 2030. This shortage has prompted an increase in wages as shops compete to attract and retain potential employees. However, the increased labor costs are directly passed on to customers through higher labor rates, with some shops reporting rate increases of 6%-9%.
Unfortunately, the impact of the labor shortage on auto insurance is even more severe, as rising rental car rates and longer repair times have led to increased costs for insurers.
The American Property Casualty Insurance Association (APCIA) has reported that “the combination of higher frequency and significantly higher auto repair and replacement costs has significantly impacted auto insurance rates.” Furthermore, the rising cost of vehicles exacerbates this issue, with new vehicle prices rising 11.8% in 2021- the largest increase since 1975, according to the APCIA. In contrast, used vehicle prices have soared to a record 37.3%.
The collision industry’s labor shortage is having far-reaching consequences, affecting not only shops and their customers but also auto insurance rates and the cost of vehicles. It’s a complex issue that requires a multi-faceted approach to resolve, including attracting more young people to the industry, investing in training and education, and improving working conditions to retain skilled technicians.
Because of these issues, it is apparent that we will continue to see raising rates among the auto insurance industry as well as many other insurance industries.