New Materials: Pricier Premiums?

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The growing complexity and cost of vehicle repairs is impacting severity and could hike insurance rates.

One of the most rapid changes we’ve seen in the automotive industry over the last five to seven years has been the adoption of what’s termed “special materials.” These range from high strength steels to aluminum, composites, mixed-material structures, carbon fibre, fibreglass, magnesium and even titanium.

All of it has been driven by the latest round of Corporate Average Fuel Economy (CAFE) standards, which require automakers that sell vehicles in Canada and the U.S. to achieve a fleet wide average of 4.3L/100 km (54.5 miles per gallon U.S.) by 2025.

Special materials are seen as one of the most significant areas where vehicle weight savings can be enabled—an aluminum bodied vehicle can see weight savings of up to 60 percent compared with a steel equivalent. A good example is Ford’s current F-150, which is around 700 lbs (318 kg) lighter than its predecessor. Additionally, aluminum’s crash absorption is about 50 times greater than steel, enabling OEMs to manufacture bigger crumple zones without incurring major weight gains on the vehicle.

While weight savings are one thing, repairing such vehicles is another. With special materials now representing up to 19 percent of insurance claims in some cases, knowing how to perform repairs properly as well as the costs involved is absolutely critical.

Different processes

In Mitchell’s Q1 Industry Trends Report, Hans Littooy, Vice President, Consulting and Professional Services for Mitchell’s Auto Physical Damage Unit, notes that when it comes to repairs, many OEMs actually recommend a different process from how the vehicle was originally manufactured. “A good example is the BMW 3 Series,” says Littooy. “BMW does not believe collision shops are able to replicate the factory welds, so instead recommends using structural adhesives for bonding quarter panels.”

Similar principles apply for vehicles like Cadillac’s CT6, which uses a mixture of high strength steel and aluminum, welded together. General Motors recommends repairers use rivet bonding instead of trying to replicate factory welds.

In order to be able to properly repair these vehicles, there has been a very significant increase by shops in equipment, training and OEM certification, with the OEMs themselves increasingly providing specific repair instructions.

Yet there’s a price to all this and as Littooy notes, labour rates along with costs related to training and equipment have increased. “In some cases, we’ve seen a 15 to 20 percent increase in severity for vehicles incorporating special materials compared with those that don’t,” says Littooy. He notes that based on his own research, today at least, there are also only a select number of collision centres that can currently handle structural repairs to vehicles like the F-150 and CT6.

Higher premiums?

Littooy asks the question: if increasing severity does become a trend for special material vehicle repairs, at which point will insurance carriers catch up to this technology and adjust their premiums? “If I buy a vehicle that features special materials and is recognized as being 20 percent safer, are my insurance premiums going to be 20 percent higher because it’s more costly to repair?”

He notes that in the early 1970s, rapidly rising insurance premiums contributed significantly to the demise in demand for big engine American muscle cars. After 1974, the market had been all but decimated. “The question is, how will an increase in severity and premium adjustment impact the market?” says Litooy. Furthermore, will the OEMs be able to respond by offering simplified repair processes while still meeting CAFE requirements? It will be interesting to see what happens.

Categories : Collision


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