Are busy times (e.g. the winter) more likely to see replace versus repair choices? In short: yes.
As automation continues to pervade the estimating process, the estimator faces fewer decisions. Reminders, compliance rules, audit tools and even mandatory fields are all designed to lead the estimator down the path of generating a consistent sheet. The goal is to ensure that an estimate written by Shop A or Appraiser B is more or less the same as one written by Appraiser C or Shop D.
However, there are still a number of activities that remain with the sheet writer’s judgement, particularly as it relates to parts. A classic debate involves the ‘repair or replace’ choice.
This decision-making process is quite complex, as there are a number of factors that come into play. For example, there’s a world of difference between replacing welded-on panels versus a bolt-on part. Similarly, the location and circumstance of the damage determines the paint, blend and associated material needs. The ability to use OE and alternative parts has a big impact on this decision. Obviously, the requirement to install only OE parts—say due to an endorsement—tips the scales towards repairing since ordering new OE parts can get pricey. However, given the freedom to choose, a cheaper alternative may be easier to order than trying to fix the existing part.
There is another factor that’s often overlooked: convenience. For backlogged body shops, choosing to replace the part saves valuable labour time, allowing resources to focus on other tasks.
Examining Audatex Insight data shows that ‘repair to replace’ ratios are lowest in the first quarter of every year. This aligns with the busiest time of the year for body shops.
Over the past five years, ‘repair to replace’ ratios are typically in the high thirty percent range, meaning that roughly three in ten decisions end up as ‘repair.’ Yet the difference between Q1 and the highest ratio quarter is approximately two percentage points each year.
When one considers the spend delta associated with repairing a part vs. replacing, two percentage points sums up to a considerable amount! It’s not only more expensive to buy a part than to repair it; there are usually time delays associated with ordering a part, since very few parts are delivered same-day, especially during the busy winter months.
Having said that, it is often difficult for an insurer to pass judgement on individual replace or repair decisions. There are many variables to consider, such as customer patience, weather conditions, seasonal severity (e.g. heavier hits in winter) and labour backlogs. In some cases, if there are not enough techs or too many vehicles in the repair queue, ordering a part (even at greater cost vs repairing) may actually improve cycle time.
If these conditions, variables and trends are a concern for you, our Professional Services team can provide a more detailed analysis by using Audatex Insight’s extensive historical database and querying tools. To request this service, please send us a note using this form.
Audatex Insight can help us understand what’s happening at the micro-level of these decisions; on the other side of the spectrum, Audatex’s AudaTarget module focuses on the macro-level. Machine learning and proprietary normalization algorithms compute and crunch through all the minutiae of specific variables (e.g. type of hit) and simply reports which body shops are most cost-effective. The system’s predictive model can factor in everything from seasonality to repair times, ensuring apples to apples comparisons of the full cost of the repair.
For a demonstration of AudaTarget, please contact your Account Manager.