Factors affecting rising cost of motor vehicle repairs

As the economy moves on from the pandemic, commentators warn of an inflationary cycle. Already we have seen the RBA increase the cash rate to 1.85% with inflation for the June quarter rising to 6.1% p.a. 

A complex set of cost drivers

Zurich is a leading insurer with nearly 150 years of experience serving customers in global and local markets. We have a substantial number of fleet and small business motor customers and therefore keep a watchful eye on the challenges facing the automotive repair industry here in Australia and around the world.

The pandemic with its border restrictions and now the armed conflict in Ukraine has disrupted global manufacturing and supply chains. The impacts are complex and deeply affect the global integrated automotive industry.

These impacts include labour scarcity and wage inflation, parts pricing, the cost of paint and consumables and the general inflationary environment.

Labour shortage

The well-publicised skills shortage is affecting nearly all industries across Australia and New Zealand. The ‘great resignation’ has a direct impact on the availability of skilled tradespeople within collision repair with many technicians choosing to pursue different careers. The shortage of skilled labour leads to a competitive labour hire environment with subsequent wage inflation and rising costs.

Parts, paint and consumables

The supply of vehicle parts has been disrupted in a comparable way to vehicles however, given the length of the supply chain, the effect can be more acute with the pricing on frequently purchased like-for-like components increasing over 6% this year. Further increases in paint and consumables costs are expected in coming months.

Technology

The advancement of vehicle technology means parts are becoming more complex, feature rich and expensive. This ultimately drives up the replacement costs for our customer’s fleets.

Inflationary environment

In Australia, inflationary pressures are building. We have seen the RBA increase the cash rate to 1.85% and inflation for the June quarter in 2022 rising to 6.1%. The motor repair industry is seeing these increases flow through not only to wages, but to all operating expenses. 

How Zurich works to mitigate the impact of inflation

The Zurich Australia Motor Claims business continues to confront these inflationary challenges through several key capabilities:

• Award-winning claims experience
• Expert, highly experienced motor assessing team
• Fleet risk services
• Scale economies from Zurich’s Priority Repair Service (PRS)
• Collaboration and spirit of partnership in working with brokers and customers
• Sharing of insights and continuous improvement

Zurich is committed to delivering, fast high-quality repairs and our award-winning customer claims experience. Please contact your Zurich Claims Representative to find out more about our risk services, claims solutions and how we can create a brighter future together.
 

James Dimitriou

Head of Claims