February 06, 2012
Conclusions made in a report about the effect of the Tohoku earthquake and tsunami on collision parts pricing might surprise claims leaders tasked with determining how to plan for the costs associated with supply chain disruptions.
According to Mitchell’s Q1 2012 Industry Trends Report, the tsunami had no effect on collision parts pricing. It also states that inflationary trends in recycled parts for both the Japanese vehicle subset and the entire vehicle population actually began back in 2010.
The complete report will be available from Mitchell on Feb. 15, 2012.
“In terms of collision parts pricing, the tsunami had little net impact on the overall behavior of parts pricing," the report reads. "While spot shortages and hoarding of parts may have occurred immediately after the tragic events in the spring, it did little to impact the overall parts situation for the subset of Japanese vehicle parts. This is likely because the most popular Japanese brand vehicles are assembled in U.S. plants, and a large number of sheet metal and plastic exterior parts are produced outside of Japan—limiting the impact of shortages coming from Japanese plants.”
For claims professionals, this is only one piece of good news. The other piece comes from an examination of parts utilization by model year of vehicle.
The use of aftermarket and recycled parts progressed linearly in both the number of parts and dollars of parts. What this means is that even when the vehicle is the same model and uses the same parts, the older vehicle is more likely to have more alternate parts used on it, lessening claims severity even as claims frequency rises with vehicles that have been on the road longer.
Mitchell's Industry Trends reports offer a snapshot of the auto physical damage collision and property casualty industries every quarter, highlighting the trends and issues that most impact the property and casualty insurance industry. The most recent editions examine vehicle repair parts trends (type, availability and pricing) that are key to understanding what direction automotive claims will take in the near term.
For this and other reports, visit http://www.mitchell.com/pubs/index-industry-trends-report.asp.