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Profits under pressure in accident repair sector

Parts and bodyshop profits have come under threat from a sharp fall in the number of car accident repairs.

An estimated 4.55 million car body repairs will have been carried out in 2012 by year-end, down 22% from a peak of 5.81 million in 2006.

Researchers at Trend Tracker believe this is partly due to high fuel prices causing a decline in car use.

The automotive research company’s biennial report on the UK car body repair market shows that average annual car mileage has fallen 6% from 8,770 miles in 2006 to 8,240 in 2011.

Over the same period, the number of insurance claims reported to car insurers as a proportion of all cars insured - known as the “claims frequency” - has fallen from 18.0% to 13.9%.

In 2012 insurance companies are estimated to have paid for 2.01 million car body repairs, 27% fewer than the 2.75 million repairs they paid for in 2006.

 Yet the Trend Tracker research shows that despite that fall, average private motor premiums have risen by 24%, from £349 in 2006 to an estimated £434 in 2012, due, insurers argue, to rising claims costs.

A recent OFT (Office of Fair Trading) enquiry acknowledged the rising cost of personal injury claims, as a contributing factor to rising premiums, but also that the rising costs of third party (non fault) accident repair claims, including credit vehicle hire and inflated non-fault third party repair costs were also a significant factor contributing to higher premiums.

Motorists have increasingly opted for higher voluntary excesses on their insurance policies to reduce premiums. But such excesses may leave drivers unwilling to pay for relatively minor repairs.

This year’s average accident repair cost is £1,297.

Trend Tracker’s lead analyst Robert Macnab says, “This trend is of concern, as it may mean that some cars are being unprofessionally repaired and may be dangerous.”

A hitherto growth segment of the repair market had been SMART (Small to Medium Area Repair Techniques) repairs.

Demand for SMART repairs grew strongly to reach 1.49 million in 2007. However, pressure on motorists’ pockets resulted in demand falling for SMART repairs to an estimated 1.16 million in 2012.

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  • M David - 17/12/2012 13:03

    parts and bodyshop profits are under bigger threat from the fact that Insurers have consistantly drove labour rates down, to the point where the specialist repairing a structurally damaged car earns 50% less for a business than an apprentice carrying out an oil and filter change . . . how can that be right??

  • T Jones - 17/12/2012 13:37

    In response to M David's comment..... What a stupid statement to make, saying insurers have driven down labour rates! The competitive market and reduced claims forces down rates in the body repair industry. Something that we should see more of in the servicing sector!

  • Racer47 - 17/12/2012 14:49

    The insurers HAVE driven down labour rates over the last 10+ years, creating an authorised repairer network that dictated the labour rate which was an average £26 an hour ten years ago when main dealer labour rates were averaging £56 an hour . . . If you didn't agree and accept the labour rate the work went elsewhere. It's obvious given the story that accident claims have dropped over the period but given the slim margin that bodyshops already operate with, as well as providing FOC courtesy cars etc, then its not difficult to see how some businesses are at risk. Clearly you lack an understanding of business overheads, and the cost that required standards with tooling, diagnostic kit etc as well as complexity of repair now adds to the business. . .

    • wayne - 24/09/2015 16:13

      Oh how times have changed. The insurers have forced many many shops to close. The number of repairers have fallen, the vehicles of today are far more technically advanced. Market forces are now in the favour of a good and decent repairer that is well equipped and well staffed aligned to manufacture approvals, who I must say are also fighting back with regards OE parts and methodology. Time to pay Mr Insurance, time to pay!

  • Paul1956 - 17/12/2012 15:24

    It appears that T Jones doesn't work in the Bodyshop or Retail Network, I have the benefit of having done both over 40 years and can say the skill of the bodyshop staff far out ways that of the apprentice doing oil and filter changes, approved bodyshops have to meet the same demanding and costly standards as the main dealer, but labour rate is about a quarter of the main dealer. The time will come where many bodyshops will be forced out of business and Insurance companies will have less opportunity to dictate low rates.