There has been a lot of discussion about the increase in average repair severity. Earlier this year, CCC’s Crash Report showed the average repair cost had climbed to an eye-watering $4,818 per claim, a 1.7% increase year over year. Parts costs increased 6%, while labor rates rose 2.9%.
But another statistic in the report caught my attention.
ADAS calibrations now appear on 28.3% of repairable appraisals, up from 21.8% the previous year. At the same time, J.D. Power reports that more than 26% of vehicle owners now carry deductibles exceeding $1,000. Several states, including California, Utah, Massachusetts, and North Carolina, have also increased their minimum liability coverage requirements.
Those statistics had me thinking about something we don’t often discuss: the shifting of the mean.
One way to think about repair costs is as a bell curve. If a portion of the lower-cost repairs begin to disappear, the peak of that curve naturally shifts to the right, increasing the average repair cost, even if inflation alone isn’t driving the change.
As more ADAS-equipped vehicles enter the U.S. vehicle fleet, many low-speed collisions are avoided altogether. Features such as autonomous emergency braking and parking sensors prevent or reduce many of the minor accidents that once resulted in inexpensive bumper repairs or parking lot claims.
Higher deductibles may have a similar effect. When a policyholder has a $1,000 or higher deductible, they’re less likely to submit a claim for a minor scrape or refinish repair. Several insurers I’ve spoken with have also noted that rising insurance premiums, driven in part by higher liability limits in some states, have led more consumers to increase deductibles or even drop collision and comprehensive coverage altogether. That, too, removes smaller claims from the data set.
So, while parts prices, materials, and labor rates are certainly contributing to higher repair costs, they may not be telling the entire story.
Some of the increase in average repair severity may reflect a changing mix of claims. As the smaller repairs disappear, the average naturally moves higher.
