The costs of car accident repairs in Europe
are set to rise by 17% over the next six years while the number of accident repairs will
increase by only 3% according to a new study published by MFBI, the independent motor
industry analysis organisation. The study analyses the accident repair markets in Germany,
France, Italy, Spain, the Netherlands, Belgium and the United Kingdom and concludes that
motor insurance companies will take steps similar to those adopted by insurers in the UK
to tighten their control over rising repair costs in Europe.
Average repair costs in the seven countries
studied in Europe by MFBI grew by 19% between 1992 and 1998, with Germany being the most
expensive repair market with an average repair cost of 1,980 euros and Spain the lowest at
only 569 euros. Although Germany is the most expensive accident repair market, average
repair costs have increased at the fastest rates in Italy and Spain. Between 1992 and
1998, average repair costs increased by 68% in Italy and by 33% in Spain, compared with
19% for all seven countries overall.
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In the Netherlands and the United Kingdom
where insurance companies direct a high proportion of repairs to insurer approved
bodyshops, average repair costs have risen at a much slower rate of 13% between 1992 and
1998. MFBI’s analysis concludes that by operating smaller networks of approved
bodyshops, insurance companies in the United Kingdom and the Netherlands have been more
effective in controlling the rate of increase in average repair costs.
While the operation of approved bodyshop
networks and direct repair programmes by insurance companies can enable insurers to
control repair costs, they do not necessarily result in lower repair costs in absolute
terms. These are more likely to be influenced by the cost of parts and labour in each
country which vary significantly.
Average repair costs in each country
comprise the costs of labour, replacement parts, paint and materials. Replacement parts
account for the highest proportion of average repair costs in Europe at 47% for all of the
seven countries studied by MFBI, ranging from 40% in Belgium to 53% in Spain. Germany, the
Netherlands and the United Kingdom have the highest replacement parts costs for accident
repairs, while Spain, Belgium and France have the lowest.
Labour costs are highest in Germany and
Belgium which reflects high employment costs in these countries, and which results in
labour costs accounting for a higher proportion of repair costs in Germany and Belgium.
This is despite the fact that insurance companies in Belgium have pegged labour rates at a
fixed level for accident repairs. Labour repair costs are lowest in Spain reflecting lower
labour costs and labour rates in Spain compared with other European countries.
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By GlobalDataTo gain control over the rising cost of
accident repairs in Europe, many insurance companies are expected to adopt similar
practices to those that are established in the UK and the Netherlands. These include
providing selected bodyshops with a higher volume of repairs in return for lower hourly
labour rates and discounts on repair invoices from bodyshops.
MFBI’s analysis of the industry
reveals that low hourly labour rates are not the most effective means of controlling
repair costs, as bodyshops will try to maximise labour costs by other means wherever
possible. The most effective route for controlling labour repair costs is to control the
amount of time that bodyshops are allowed to charge for carrying out specific repair
tasks.
Most insurance companies and assessors and
many bodyshops in Europe have adopted computer assisted repair estimating systems based
either on car manufacturer repair times, or insurance industry repair times. These systems
determine the number of hours that bodyshops can charge for carrying out specific repair
tasks which enables insurance companies to control the time and labour cost of repairs.
Despite the adoption of these computerised
systems, there are significant variations in the labour cost of repairs between different
countries which reflects the different times bases and hourly labour rates used for
calculating repair costs. Hourly labour rates range from a low of 27 euros in Spain and
Italy to a high of 72 euros in Germany. A significant development in Europe has been the
increase in cross-border trade in accident repairs. Lower labour costs in neighbouring
countries such as those in the Czech Republic compared with Germany, is encouraging
motorists to take their cars across the border for repairs.
All these developments will have a negative
impact on bodyshop profitability in Europe, and MFBI’s forecasts predict that the
number of bodyshops operating in the seven countries studied, will fall by 8% from 65,320
outlets in 1998 to 59,270 outlets in 2005. The countries which will experience the largest
falls in bodyshop numbers will be Italy, France and Germany. Smaller bodyshops will also
be affected by a potential loss of work as insurers adopt direct repair programmes and
concentrate a higher proportion of repairs among a smaller number of larger bodyshops.
However, while direct repair programmes
have been fairly successful in controlling repair costs for insurers in the UK and the
Netherlands, the implementation of similar programmes across the rest of Europe will be
more difficult. In the UK and the Netherlands, motor insurers have offered policyholders
incentives such as free courtesy cars for agreeing to use an insurer’s approved
bodyshop. In other countries and particularly in Italy and Spain, motorists prefer to use
a bodyshop of their own choice rather than one selected by an insurance company.
In some countries such as Germany, France,
Belgium and Spain, it is not unusual for insurers to pay the policyholder rather than the
bodyshop for the cost of accident repairs. In Germany, France and Belgium it is also
possible for a policyholder to claim the cost of an accident repair from an insurer, and
then keep the money without having the car repaired. This results in a high level of
claims for minor accident damage than is actually repaired. It also enables policyholders
to shop-around and obtain a cheap repair and keep the difference in cost for themselves.
Lower repair costs may be achieved by using lower cost second hand or pattern parts rather
than the car manufacturers’ own brand parts.
Insurance companies have tended to focus on
the cost of labour within accident repairs as being the cost that insurers can most easily
control, and labour costs are tending to fall as a proportion of total repair costs. This
is because cars are being designed to be easier to repair with less labour time required
to carry out repair tasks, and because insurance companies are increasingly reducing
bodyshop labour rates. Another reason for falling labour costs is that because of strict
warranty and repair liability considerations, bodyshops are tending to replace rather than
repair damaged panels and parts. This means that a higher proportion of parts are being
used in insurance funded accident repairs, resulting in a higher proportion of repair
costs being accounted for by replacement parts.
Strict warranty and repair quality
considerations mean that original equipment manufacturer (OEM) replacement parts account
for 80% of replacement parts used in accident repairs in Europe, rather than lower cost
non-original or pattern parts. Warranty and repair quality considerations mean that
insurance companies shy away from using non-original parts in accident repairs, many of
which are produced by the same manufacturer as the OEM part, but at a cost saving of 67%.
This is because of the high margins achieved by car manufacturers on their branded parts
at between 45%-55% which are invoiced to insurers at retail selling prices.
If insurance companies are to achieve
greater control over accident repair costs in Europe, they must achieve a reduction in the
cost of replacement parts. This can only occur in a less fragmented repair structure where
insurers can obtain greater purchasing power by consolidating repairs among a smaller
number of bodyshops over which they have greater control. Some insurers may also be
tempted to operate their own accident repair centres as Direct Line and Churchill
Insurance in the UK and Mapfre in Spain have done.
MFBI’s forecasts of market size to the
year 2005 predict that while the number of accident repairs will grow in the seven
countries studied by only 3% from 34.7 million to 35.8 million repairs, the value of the
market will increase by 17% from 43.6 billion euros to 51.0 billion euros. This will be
due to a 14% increase in average repair costs in the seven countries from 1,256 euros in
1999, to 1,426 euros in 2005.
The Car Body Repair Market in North West Europe report was produced by MFBI, prices are as follows:
|
Complete
Europe study (8 reports) |
£4,250
|
|
Car
Body Repair Market Europe, Summary |
£1,000
|
|
Car
Body Repair Market in Belgium |
£800
|
|
Car
Body Repair Market in France |
£800
|
|
Car
Body Repair Market in Germany |
£800
|
|
Car
Body Repair Market in Italy |
£800
|
|
Car
Body Repair Market in the Netherlands |
£800
|
|
Car
Body Repair Market in Spain |
£800
|
Car Body Repair Market in the UK is supplied free with any other of the above reports ordered.
To order a copy of this report please click here
TABLE OF CONTENTS
Introduction
Research Methodology
Definitions
Abbreviations
THE CAR BODY REPAIR MARKET IN GERMANY
Market Background
Population and Car Ownership
Car Sales and Car Parc Size
Car Leasing
Market Size and Trends
Accident and Repair Rates
Motor Insurance Claims – Passenger Cars
Accident Damage Claims – Passenger Cars
Total Market Size
Market Factors
Motor Insurance Market Trends
Average Premiums in Europe
Compulsory Third Party Insurance
Consolidation Among Insurance Companies
Motor Insurance Distribution
Accident Management
Environmental Legislation
Health and Safety Legislation
Paint Systems
Paint Brands
Repair Estimating Methods
The Repair Estimation Process
Independent Assessors
Estimating Systems
Video Imaging
Replacement Parts
Reconditioned and Second-hand Parts
Repair Tourism
The Body Repair Supply Structure
Number of Body Repair Outlets
Bodyshops
Role of Car Dealers in Body Repair
Bodyshop Size
Body Repair Networks
Supply Structure Trends
The Accident Repair Process
Influences Upon Bodyshop Selection For Vehicle Repair
Insurance Agents
Insurance Companies
Recovery Companies
Car Dealers
Accident Management
Courtesy Cars
Body Repair Labour Rate
Bodyshop Management Issues
Skills Availability
Pay Levels, Bonuses and Employment Costs
Social and Welfare Costs
Operating Costs and Profitability
Management Systems and Profitability Measurement
Insurer Repairer Relations
Increasing Customer Service
Future and Conclusions
Motor Insurance Market
Increasing Insurer Influence
Increasing Car Manufacturer and Car Dealer Involvement
Independent Bodyshops and Higher Service Levels
Closer Insurer Repairer Relations
Accident Management
Market Size
Supply Structure
Appendices
Appendix 1 – Profile (by country)
Appendix 2 – Labour Rates (by country)
Appendix 3 – European Premiums by Risk Category
Further Information:
Research Methodology
The research methodologies employed in the compilation of this report include desk research and extensive face to face depth interviews with senior managers in the car body repair industry including independent and franchised bodyshops, motor insurance companies, car manufacturers, paint manufacturers and distributors. Quotations from depth interviews are employed in the report to provide emphasis to and summarise particular points in the main findings. Where possible, quotations from trade research are used verbatim but in order to maintain the confidentiality of information provided by respondents, key words that would otherwise identify the individual or their organisation have been left out or substituted with general descriptions in brackets.
The Car Body Repair Market in North West Europe
This is a seven country study of the accident repair market in North West Europe. The study comprises seven separate country reports plus a comprehensive summary report, all of which can be purchased individually or together as a complete study.
- The countries covered in the research are:
- Belgium
- France
- Germany
- Italy
- Netherlands
- Spain
- United Kingdom
The contents of each country report is as follows:
Market Background
Population and car ownership 1992-97; Car sales, scrappage rates and car park size 1992-97; Car leasing.
Market Size and Trends
Motor insurance claims 1992-97; Market size; market segmentation, insurance repair penetration; Number of repairs 1992-97; Value of repairs 1992-97; Average repair cost; Accident repair rate.
Market Factors
Motor insurance market trends; Average motor premiums in Europe; Third party insurance; Insurance market competition; Motor insurance distribution; Accident and claims management; Environmental legislation; Repair estimation; Estimating systems; Video imaging; Replacement parts.
The Body Repair Supply Structure
Number of body repair outlets; Bodyshop size; Bodyshop work supply; Body repair networks; Supply structure trends; The accident repair process; Influences upon bodyshop selection for vehicle repair; Courtesy cars; Accident management; Labour rates.
Bodyshop Management
Skills availability; Pay levels; Operating costs and profitability; Management systems; Insurer repairer relations; Customer service.
Future and Conclusions
Motor insurance market; Insurer influence; Car manufacturer and dealer involvement; Insurer repairer relations; Market size forecasts 1998-2005; Supply structure forecasts; Number of bodyshops 1998-2005.
Each country report:
Length – 40+ pages, 20 tables and charts.
Summary report:
Length – 36 pages, 28 tables and charts.
