High-Tech Cars Drive Higher Vehicle-Repair Costs

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The State Journal- Register (Springfield, IL)

January 12, 2016

Hands-free infotainment systems, biometric access and on-board computer screens have joined bumpers, grills and fenders in the everyday work of auto-repair shops.

Gadgets as standard equipment also have raised repair costs and changed the risk calculations for insurers.

In a December earnings report, Springfield insurance and financial services company Horace Mann Educators Corp. took note of the industry trend as a factor in increased auto-claims losses and lower profits from July through September compared to the previous year. Horace Mann specializes in insurance and financial products for educators.

Average vehicle repair costs began rising faster than the rate of inflation in 2012, including a 3.4 percent increase in 2014, according to CCC Information Services, an insurance industry data and technology company based in Chicago. Replacement costs for vehicle technology, according to the industry, have been a key driver.

“The technology in vehicles has accelerated,” said Allan Robinson, senior vice president of claims at Horace Mann. “By consumer choice, by consumer demand, many of the options are really standard. There’s a shift to a lot more safetyfeatures, which is good, a lot more electronics, and just a lot more parts.

“There use to be one airbag, then there were two airbags, and now there are four airbags.”

Government regulation also is driving safety features. Under 2014 rules approved by the U.S. Department of Transportation, new vehicles under 10,000 pounds must have backup cameras by mid-2018. A driver display screen must show a 10-by-20-foot zone behind the vehicle. The National Highway Transportation Safety Administration estimates the feature—approved after a series of backup fatalities involving children—will add $132 to $142 to the cost of a vehicle.

While self-driving cars are said to still be years away, some of the features already are standard. Volvo has introduced adaptive cruise control in some vehicles. The feature allows drivers to set speed and time interval to the vehicle in front of them, according to a company summary of the feature. The systems rely on radar to automatically slow the vehicle if traffic slows and to resume the set speed when traffic clears.

More cars, cheaper gas

CCC Information Services reported in July that auto-claims costs and frequency began rising in 2014 after years of remaining mostly flat, while miles driven returned to pre-recession levels as a result of falling gasoline prices. There also are more new vehicles on the road. Automakers last week reported record U.S. sales of nearly 17.5 million vehicles in 2015.

“We’re in the early stages of a very long trend. Cars are becoming more expensive,” said Robert Hartwig, economist and president of the Insurance Information Institute in New York.

Auto price-tracking company Kelly Blue Book reported an average new-vehicle price of $33,543 in August 2015, an increase of more than $1,100 from August 2014.

In addition to consumer demand for high-tech convenience, Hartwig said, automakers know that safety sells.

“It’s why automakers show their vehicles being destroyed on television on a regular basis,” Hartwig said. “They’re showing how well they hold up.”

There are downsides to technology beyond texting and driving, according to safety analysts, including driver complacency, with features such as collision avoidance and self-parking technology.

“Some insurers have observed it in the area of aviation,” Hartwig said. “Over-reliance on automation has led to an erosion of piloting skills.”

Horace Mann vice president of investor relations Ryan Greenier said technology has become a key factor in cost, coverage and risk calculations for insurers. He added that technology also provides real-time data on claims trends and repair costs.

“Think about the way the insurance industry as a whole set their pricing,” Robinson said. “They rely on data. The actuaries are looking at experience, and they’re making projections, and they’re making assumptions about how technology determines what the cost will be.”

Laptop diagnosis

Auto-repair technicians are as likely to reach for a laptop as a wrench when assessing damage to newer vehicles, said Brad Zara of Zara’s Collision Center in Springfield, IL.

“There’s a port up under the dash on every vehicle,” Zara said. “They plug in a scanning tool or a laptop computer to check the systems. The equipment has just become so specialized.”

Zara said the rapid shift to smart technology in vehicles also requires regular training updates for technicians.

“There are just so many items that are tied to computer systems,” Zara said. “Now, we see a number of systems that might need to be reset or recalibrated.”

Dick Rogers, a professor of automotive technology at Lincoln Land Community College, has been teaching auto systems and repairs for more than three decades.

Unlike fenders and bumpers, said Rogers, backup sensors, navigation systems, on-board computers and other digital electronics typically must be replaced rather than repaired.

“There’s sensors everywhere. There’s front-end sensors, side sensors, rear-end sensors, and those all tend to get damaged,” Rogers said. “If there’s even a hint of damage, most shops will replace them.”

Rogers, too, said the pace of change likely will continue to accelerate, adding that use of sophisticated scanning equipment and software has become standard for auto-repair training.

“Basically, it’s a smartphone on wheels,” Rogers said. “Now, they’re talking about automated cars. When that becomes the standard, the repairs will be astronomical.”

Copyright 2016 The State Journal-Register All Rights Reserved

This article’s original title was “High-tech fender benders; ‘Smartphone on wheels’ drives higher vehicle-repair costs

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