Brexit and advancing technology inflating claims cost already

The insurance industry is already feeling the strain of Brexit and advancing technology, according to Allianz head of claims, Graham Gibson.

“There are three parts to the difficulties presented to the industry when it comes to Brexit,” he said.

Regulation

“First, you have the regulatory implications.

“That means Green Cards, which will definitely be needed in the case of a no-deal Brexit, but if there is a deal in place, then it depends on the details of the deal.”

Green Cards are official documents that are being issued by insurers to allow drivers to provide proof of cover. Insurers are providing all customers in Northern Ireland with a Green Card to allow them seemless travel over the border. But, for those in England, Scotland and Wales, if a customer is planning on taking their vehicle abroad, they must apply for a Green Card through their insurer.

But, Gibson said the process of obtaining a Green Card is more difficult and time-consuming than needs to be.

“As, by law, Green Cards cannot be sent to a customer as a pdf document for them to print off themselves.

“The law states that the paper has to be a particular type, a particular size, and a particular shade of green.

“So, it is not possible for insurers to simply email out a copy of the document, as the customer is not likely to have the particular paper type to print it off themselves.”

Purchase of materials

Another obvious setback and difficulty Gibson outlined was the purchasing of materials from the mainland.

“We buy a lot of things from Europe,” he said.

And as a direct impact of Brexit, Gibson says the industry is already seeing substantial inflation in the claims space.

“The easy example is car parts and paint. We have seen a significant inflation increase just driven out of Brexit and the effects of the impact on the pound.”

He then warned that if the uncertainty around Brexit is not fixed, the industry could find itself trapped in a deeper hole.

He said: “If that goes the wrong way further, there will be further inflationary impacts.”

Skills

Finally, he outlined how skilled contractors could be harder to come by.

“In the vehicle repair space, a lot of technicians are from continental Europe. But also in the home repair space, electricians and other technicians are from the continent, and they do just as good of a job for a significantly lower price.

“So I see pressures there also. Both in building claims but also in the vehicular space.”

New technology dilemma

While a lot of the market is looking at autonomy and self driving cars, Gibson is looking at the vehicles coming to the market now that are bringing their own challenges for the claims market.

“Some of the cars we are seeing coming to market now are throwing up challenges.”

Gibson gave two examples, the Audi 55 ETron and the new Ford Fiesta, which will pose this problem, and mark the beginning of a very significant shift in the repair space.

“The (Audi) ETron is a fully electric vehicle, and one that is unique in its construction in terms of anything we have seen before,”

“The base of the car is just one unit, it is not made of lots of different bits, which is what we are used to.

“If you damage that, it is a sealed unit and it is very difficult to fix. So what might be considered to be a very small accident, might end up with a very big repair bill.

“Meanwhile, the new Fiesta has a rolled chassis. It is a composite, not one hard bit of metal. So, if you damage that, that is not repairable, and you will need a new chassis or a new Ford.”

So why have these manufacturers made these changes if they are going to be so difficult to fix?

Gibson said: “A lot of the new motor technology coming out is based around safety. But it is very expensive.”

And while the insurance industry is still having to deal with the apparent dangers of old technology, the claims space is now having the expense of new technology on top of that.

“At the moment, we are seeing the expense of the kit, but we are not seeing the reduction in frequency of claims.”

He does, however see a tipping point, but not in the near future.

“There will be a tipping point where we see the benefits,” he said. “But at the moment it is still going up and spiking.

“We are not expecting that tipping point any time soon.”

Consolidation on the horizon

For smaller, independent repair shops and contractors, however, Gibson sees them struggling in the future, with the onslaught of new technology.

“The smaller, independent repair shops, that don’t have the scale or resources will suffer with the new technologies that are coming out of vehicle manufacturers.

“The vehicles coming out now are proving difficult to repair, and manufacturers are leapfrogging each other all the time. Audi and Ford have the new technology, but that is only until BMW and Mercedes come out with theirs.”

With this, along with the increased demand of the larger repair shops, the ones with the resources and space to deal with these complicated repairs, Gibson predicts an inevitable outcome.

He said: “Consolidation in the repair space will be an inevitable outcome for two reasons.

“The labour condundrum, as demand for the larger shops increases, then they will need to bring on more, and consolidation allows that.

“Then, I think the increased complexity of vehicles also. Smaller companies wont have the skill or the resources to properly tend to these connected or autonomous vehicles coming to the market in the next few years.”