As the government has extended the lockdown for a minimum of three further weeks to assist in controlling COVID-19, the UK accident repair sector is estimated to be losing £240m in revenue, per month as a result of the pandemic our research shows.
New research carried out by the automotive industry research specialists in partnership with the National Body Repairers Association (NBRA) and ARC360, revealed that motor claims notifications had fallen by more than 70% in recent weeks as a result of the UK’s lockdown measures.
The result of this decline in volumes, is seeing bodyshops either continue to operate at approximately 30% of normal capacity or shut their doors completely. Regardless of which path chosen, NBRA calculates the average bodyshop in the UK is currently losing somewhere in the region of £16,000 per month.
The impact of the loss, from the combined insurance-funded and the fleet market, leaves many bodyshops fighting for survival.
Mark Bull, managing director of Auto Body Projects and Trend Tracker said, “Every economic downturn leaves a legacy. COVID-19 will be no different.
“For the accident repair sector, it has long been recognised that bodyshops operate on a marginal profit, requiring a high volume of work to maximise their available capacity. When volume and, in turn, revenues to UK bodyshops have fallen by over 70%, it becomes extremely difficult.
“In short, current terms of business between motor insurers and body repairers are not sustainable.”
The longer the pandemic continues, the greater the issues become and even once social distancing restrictions are lifted, as yet, no one truly knows how businesses and individuals will adapt to what is commonly being referred to as ‘the new normal’.
Bull continued, “There will inevitably be business casualties, but the post-pandemic trading environment could also provide positive opportunities for surviving bodyshops, in particular when it comes to customer relationships.
“Bodyshops and insurers have a unique opportunity to better understand their respective positions and to reset the terms of business, with a view to providing safe, quality repairs and an excellent customer service.”
The insurers dilemma
Whilst bodyshops face their crisis head-on, insurers have their own challenges to deal with as cars are parked-up and UK roads have become desolate – road travel plummeting by more than 70%, to levels not seen since 1955.
With annual premiums paid, UK motor insurers are coming under increasing pressure to return millions of pounds to policyholders. This course of action has already occurred in America with up to $10.5bn being committed.
Progressive, one of America’s largest motor insurers, who had already committed an approximate $1 billion refund to its policyholders because of fewer claims has taken an additional step to broaden its monetary relief strategy in assisting its network of bodyshops by providing $2 million to $2.5 million, saying: “Progressive values the relationships they have with their Network shops, and the various ways they assist in servicing the inspection and repair needs of mutual customers. Due to fewer claims that come from less frequent driving, Network shops face uncertainty as business conditions have changed. In light of the current environment, Progressive will be issuing checks to each active Network shop to be used for any purpose at the shop’s discretion.”
How each insurer decides to respond during such time is yet unknown and whilst more proactive, act sooner and gain reputational benefit, early adopters are fragile to larger reactive moves from competitors.
Therefore, UK motor insurers face many external pressures from both policyholders, bodyshops and their supply chain. Striking the right balance between customers’ satisfaction and retaining sufficient capital to support and enable a viable and sustainable supply chain, whilst retaining operating ratios, may prove challenging.