Jim Loughran, chief executive at E2E Total Loss Claims Management, explores what is coming down the line in the salvage sector
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It is not unusual to see the total loss ratio of a typical motor insurer sit at 25% of all reported accidents. One in four incidents that might have been thought to be capable of repair are written off, with owners of those vehicles often left to fend for themselves until the settlement payment arrives in their bank.
Even then, the story of inconvenience and disruption does not end.
If the monies do not have to be used to settle the financial requirements of bank loans, PCP arrangements or hire purchase, the consumer will then need to embark upon the sometimes arduous task of replacing the vehicle – and we all know the shortcomings of the gap insurance market, as recently identified by the FCA, even if the consumer has such a policy in place.
Finally, recent rulings and extensive commentary by the Financial Ombudsman Service and FCA has made it clear that the hitherto common practices of insurers when determining the settlement amount leave a lot to be desired.
Rumour has it that more than one insurer has received the dreaded ‘knock on the door’ from the authorities and is scrambling to fix perceived past misdemeanours.
The simple truth of the matter is that the world of total loss claims management can be horribly difficult, with a whole raft of environmental, process and customer challenges that are difficult to address.
Layer upon layer of complexity is added as the journey unfolds that require engineering, IT, ESG, customer experience and technical supply chain management capabilities that are not always easy to come by in resource challenged organisations.
To date, the focus on merely maximising the gap between revenues and expenditures has successfully managed to mask the core requirements of this sector.
However, perhaps this is all about to change. Not just because of the admonishments of the regulators, but because of a growing and increasingly sophisticated supply element that has barely scratched the surface, but which is now set to explode.
Driving new opportunities
At less than 2% of the estimated parts market for repaired vehicles, the recycled parts supply has not yet had a major impact. However, new IT solutions, national supply arrangements and insurer demands for cost savings are driving substantive change in this aspect of the total loss sector.
There are also the – usually secondary – considerations for environmental best practices and the known availability of a recycled part that is sitting on the shelf awaiting purchase, which also helps to reduce expensive extended cycle times.
Many salvage operators now see themselves as primarily parts suppliers with the collection and disposal of salvage being a ‘means to an end’. That is not to deny that there are profits to be made in total loss claims management, but nowadays it is the entire package of goods and services that combine to make the sector the powerhouse of innovation that it is rapidly becoming.
Reclaimed parts could be the catalyst that finally brings the total loss and salvage sector to the front and centre of the claims management business – and policyholders will surely be better off if that were to occur.
