Blog: A time for action – the benefits of reclaimed parts in motor insurance

A recent webinar, hosted by Insurance Post and e2e, discovered an overarching consensus surrounding the benefits of reclaimed parts and the current barriers to wholesale take-up across the motor insurance industry. Mia Constable, head of business development at e2e Total Loss Vehicle Management, investigates.

Mia Constable

Reclaimed parts were acknowledged by the panellists at the webinar as a cost-effective, environmentally friendly solution. They can help to reduce motor claim costs, avoid parts delays leading to log jams in body shops, support environmental, social and governance carbon-reduction targets, and improve customer experience with reduced claim life cycles and fewer total loss outcomes.

In regards to indemnity, using parts from a vehicle of the same age – or younger – is returning policyholders to their pre-accident state. It’s the standard approach to motor claims repairs elsewhere in the world.

However, until recently, the UK has only carried out repairs using new parts. It’s fair to say that this is changing, but it is still relatively slowly when considering claims inflation, extended key-to-key times, and the genuine threat of carbon taxation, which was on the agenda at the COP27 conference held earlier this month.

Customer benefits

Encouragingly, it was agreed that using reclaimed parts in motor repairs was not generating negative reactions or challenges from policyholders. But insurers and body shops must ensure that they get the customer benefit messages across to policyholders clearly and consistently.

There were several messages that were felt would resonate with policyholders. These include:

  • Using reclaimed parts controls repair costs which in turn helps to keep motor premiums lower.
  • Reclaimed parts are safe.
  • Reclaimed parts are readily available, meaning that vehicles can be repaired and back on the road more quickly.
  • Reclaimed parts generate less carbon monoxide and greenhouse gases than manufacturing new parts would, so they help to protect the environment

Inevitably, the more that insurers include reclaimed parts in their policy wording, the more consumers will, in the future, expect and accept this approach.

Body shops and potential barriers

Traditional body shops contracting with their insurer work providers – designed around payment for parts and labor – were also called into question and identified as a potential barrier. In this scenario, the body shop, which is required to source and fit the reclaimed part, does not always benefit from the value created – and this is at a time when its profit margins, capacity and resources are already squeezed.

And yet, body shops are still fundamental to the successful adoption of an insurer’s reclaimed parts strategy.

A review of contract, considering increased labor rates or fixed fees, gives body shops the flexibility to source new or reclaimed original equipment manufacturer parts, and benefit from the typical 70% cost savings on the recommended retail price. This way, all parties that are involved in the process – insurers, repairers, vehicle recyclers and customers – may benefit.

The panellists agreed that technology was a significant barrier to increased wholesale use of reclaimed parts. Insurer, body shop and vehicle recycler technology are fractured and must be addressed.

Consistency and connectivity is needed across industry processes and systems. Only then can the wide-scale industry adoption of reclaimed parts become commonplace and the process future-proofed.

Availability, cost and location

Integrating availability, cost and location of reclaimed parts into the front end of the first notification of loss and repair estimating process is vital to success. This will unlock the repair savings across a motor book of business, expedite the repair process, and reduce the number of vehicles being classified as a total loss when actually they can be economically repaired with reclaimed parts.

A centralized system, allowing the free flow of information through the motor claims journey between insurer, repairer and recycler, would increase efficiencies for all parties. Currently, lack of connectivity and disjointed processes lead to time-consuming part searches, often involving multiple rekeying of data, which culminates in a breeding ground for failure demand and supply-chain friction.

Achieving this joined-up approach requires collaboration from all parties. A desire for beneficial outcomes is undeniably apparent – ​​and there’s a real sense that the time for talking is over. So, let’s collaborate, explore the options and drive forward some action!

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