Different structures and a different approach to claims are likely to benefit both insurers and collision centres in a post-COVID-19 marketplace.

The COVID-19 pandemic has upended almost every industry on the planet. In the collision repair/automotive sector, it’s also changing the way in which claims and repair procedures are handled.

During the crisis, the International Body Shop Industry Symposium (IBIS), put together a series of webcasts under the banner of Leading Lights.

The aim of these webcasts is to bring insightful information that enables collision industry stakeholders to advance their own businesses as well as collaboratively elevating the sector as a whole on a global scale.

One of the key pillars in creating a successful and thriving industry revolves around the relationship between insurers and collision centres and the first Leading Lights webcast focused on exactly that.

Frederick Bisbjerg, Chief Strategy & Business Officer for UAE based insurer Noor Takaful, delivered some fascinating content–not only regarding the current landscape and the challenges facing both insurers and repairers but how, moving forward in a more digitally focused environment, both parties and can find new ways to collaborate—to not only help each other but ensure the future of the collision repair sector.

VUCA-V

Referring to the COVID-19 pandemic, Bisbjerg provided an overview of the situation via what he calls VUCA-V.

Derived from the original VUCA—a U.S. Army War College framework for dealing with crisis situations that has its origins in the final days of the Cold War, Bisbjerg believes this framework can help collision repairers and insurers navigate through the crisis and position themselves to be stronger coming out of it.

Breaking down the acronym, VUCA-V can be summarized as follows:

• V stands for Volatile, meaning the COVID-19 pandemic continues to evolve creating an unpredictable environment around us.
• U stands for Uncertain—meaning while we know the cause and effects of the pandemic we don’t really understand the scope of it, or what the aftershocks might be, so the future remains uncertain
• C refers to Aomplex—meaning we’re dealing with a complex situation that features many interconnected components and what Bisbjerg describes as ‘casual’ relationships. These include aspects such as more people working from home, the drop-in vehicle activity and collisions witnessed during the spring and the longer-term implications for insurers, repairers and the larger economy.
• A stands for Ambiguity in that while we do have some trends and predictions as to how the industry (and the world) may look in a post-COVID-19 environment, the full effects as yet are still unknown.
• V (an additional letter added by Bisbjerg), refers to Virtual. There is no question that the pandemic has accelerated adoption of virtual technologies by leaps and bounds, with virtual conferences and meetings becoming the norm and business travel—a previously lucrative segment–having been decimated in a very short period of time.

With all these factors in mind, Bisbjerg said that the main consideration is understanding what the new normal is going to be moving forward and practices we employed yesterday aren’t likely to work tomorrow.

Big changes

For insurers and repairers, the shift to virtual meetings, virtual learning and virtual purchasing of products means big changes in the way the claims process and ultimately repairs are handled.

Additionally, it also requires businesses to be nimble and quick to adapt, meaning that for collision centres, some smaller operators that in the past may not have been perceived as a threat could very well become one for larger shops.

Additionally, a shift toward a more virtual modus operandi, including digital documentation and signatures, as well as an acute focus on cash flow to ensure business survival is likely to remain critical in the immediate months and years ahead.

For insurers, Bisbjerg said that agility and flexibility are going to be critical moving forward as market volatility is expected as a result of pandemic aftershocks and fluctuations.

Therefore, he noted, insurers need to consider the concept of outsourcing some of their claims functions instead of relying on a relatively high fixed overhead of permanent on-site staff handling them in-house.

“This could be outsourced and pay per claim,” said Bisbjerg, “meaning that insurers would save money when the number of claims declines and when more people start driving and getting into collisions we would be able to increase the cost base without having so much tied up in overhead. Doing so would allow insurers to follow fluctuations in the market much better.”

Digitization

Additionally, COVID-19 has brought business processes into sharp focus with digitization making a number of previous roles within the insurance space redundant.

Bisbjerg noted that in these kinds of situations, a sound strategy is not to simply eliminate staff but re-train them for other roles to become more digitally-savvy since in many cases it is more costly to hire new staff than retain and re-train existing employees.

In terms of collaboration and working with other stakeholders such as collision centres and vendor partners, virtual meetings and digital processes need to go hand-in-hand.

“How do we set up these systems, so we are capable of running complete operations as digitally as possible?” said Bisbjerg. “It is time for insurers to do it and it’s time for collision centres—no discussion about it, we cannot delay doing this.”

Besides the virtual and digital aspects, there’s also the communication piece to consider.

Virtual conferencing allows far more efficient and regular interaction, which can lead to decisions being made faster, claims processed more quickly, better results and ultimately better, stronger partnerships built on real trust and collaboration.

Price is not often far from any discussions revolving around insurance claims and collision repairs and while it has been a key issue for the last several decades, Bisbjerg warned that if, as predicted we head into a global recession, we’re likely to see a greater focus on pricing as insurers look to stay profitable, placing additional pressure on collision centres and vendors.

“You need to prepare for this,” said Bisbjerg, referring back to the need for insurers to be adaptable and flexible by shredding fixed costs and outsourcing claims to be more fluid and profitable with market fluctuations.

He noted that while this could potentially be a source of greater friction between insurers and collision centres, by focusing on transparency and openness during discussions between both parties, there could be ways to finding a solution that’s agreeable to both sides.

Repair versus replace

One approach is looking at the repair versus the replacement of parts.

There’s no question that over the last few years the cost of many collision parts has skyrocketed, driving up severity and also insurance premiums, with more vehicles being written-off as total losses.

Yet on the flip side, the growth in new welding and repair technologies is allowing more and more collision shops to repair parts such as bumper covers and headlight assemblies whereas, in prior times, they often had to be replaced.

“The proportion of spare parts [related to the cost of repair] is typically very high,” said Bisbjerg,  so if we are openly able to make agreements for repairing instead of replacing we would save a lot of money on parts and as insurers, we wouldn’t mind paying extra for labour, which is very good for collision centres, as they are able to generate a much healthier margin on labour to cover their permanent employees, while at the same time, the overall costs of the repair are lower.”

Cultural shift

In order to make such strategies effective, however, Bisbjerg noted that it requires a cultural shift in a corporate culture where insurers aren’t stuck in silos, with individual departments being incentivized which, in many cases can result in conflict and chaos, since there are a number of vested self-interests within individual departments that prevent the organization and its collaboration with collision centres from moving forward.

Yet like many things, while the concept may be simple, implementing it in the real world is often much harder.

Bisbjerg said, that one-way insurers can likely tackle it is by setting up what he refers to as a ‘war room,’ where all strategies are on the table and no hierarchy exists.

“One of the things you have to make sure with the action plans you create in the war room is accountability. You have to put the different leaders from the different business units together and make them accountable for changing.”

In today’s environment, Bisbjerg noted that insurers need to take advantage of the technology available to them today, leveraging virtual and digital platforms to their specific requirements and then creating an incentive structure and performance management that allows for the true restructuring of the organization.

Along with it, ensuring that staff, from the management down, are able to re-train and adapt to new ways of working will help accelerate the change process and create a culture that is more flexible, adaptable and prepared for the road ahead.