Mileage and insurance. When these two words are linked together, most people assume that the subject will be “mileage-based insurance” or the “pay-as-you-drive” model of insurance. But often overlooked is the effect that the quest for better gas mileage has had on auto insurance. Our desire for better miles per gallon (mpg) has impacted the auto insurance business from premiums to collision repair.
In late 2009, the Obama administration advanced by four years the George W. Bush administration’s requirement that the new U.S. vehicle fleet (cars and trucks) attain a combined 35.5 mpg. President Obama moved up the requirement to model year 2016 from the Bush administration’s 2020 deadline. Automakers scrambled to meet the target date or face buying “credits” for missing the goal of passenger cars getting 39 mpg and light trucks (such as the Ford F-150, Chevrolet Silverado, and Dodge Ram) achieving 30 mpg.
Mileage increases can be achieved in several ways, such as adding more gear ratios to automatic transmissions, using smaller displacement engines with turbo chargers, and lightening the vehicle weight. Carmakers are exploring all of these options, but because trucks need towing capacity and torque strength, vehicle lightweighting is the primary way to achieve increased mileage in pickup trucks.
The Ford F-150 dominated the collision news space for much of 2015 because the radical step of going to an all-aluminum body had big implications for collision repairers and insurers. The basic fact that trucks are sold in rural areas where the least technically advanced body shops are found is a conundrum. Initial crash tests conducted by the Insurance Institute for Highway Safety also point to higher repair costs.
Chevrolet, sensing truck buyer apprehension about the strength of aluminum, launched an ad campaign showing that the F-150 sustained more damage than its Silverado in common work-site collisions. The marketing folks at General Motors—Chevrolet’s parent company—must have forgotten that Chevrolet committed to an aluminum-body Silverado by 2018. Ram must follow suit with lightweighting its trucks in order to achieve the mandated mpg requirement, and that will add to the cost of repair.
Passenger cars catch a little break in achieving higher mileage because they can be made smaller and turbo charging (and in some cases, twin turbos) can be added to the power train to squeeze out higher mileage while maintaining a pleasant driving experience. But moving to lighter weights is leaving its mark on passenger cars, as well. We are driving smaller cars than we did in the early 2000s. That not only increases claims costs for repair, but also contributes to rising frequency and severity of bodily injury.
The materials used in vehicle construction have changed, too, and the costs to repair have increased. Bolt-on aluminum parts (especially hoods) are much more common, with nearly half of the new vehicles sold in the U.S. last year using aluminum hoods, according to research firm Ducker Worldwide. These hoods require replacement more often than steel, adding to the cost of a repair. Carbon fiber and plastics are being used in places where steel was previously used, and these materials cannot be repaired. Even plastic bumper covers are going on a diet to increase mileage. Mazda launched a new plastic bumper cover across most of its fleet that not only is 20 percent lighter, but also is made of thinner material. The mild steel panels used on doors are a thinner gauge and gain strength by more complex body line creases, which complicates repair and, in many cases, makes what would have been a repairable door panel in previous generations of cars unrepairable.
But aluminum, carbon fiber, and plastics aren’t the only thing carmakers are using to reduce the weight of passenger cars. For example, the 2016 Honda Civic uses 1500 MPa “hot stamped” ultrahigh-strength steel (UHSS) in major portions of the vehicle structure to improve rigidity and reduce collision intrusion into the passenger compartment. In fact, more than a quarter of the vehicle is UHSS.
The use of hot stamped UHSS reduces weight and increases rigidity admirably. But here’s the rub: frame rails can’t be straightened or sectioned. When damaged in a collision, the only option is to remove and replace the damaged component. Honda’s collision repair bulletin spells out the restrictions: “The use of 1,500 MPa frame rails requires that they be replaced as complete assemblies at the factory seams, with no sectioning allowed.” Previously, when a Civic was involved in a rear-end collision that bent a frame rail, the car was placed on a frame machine and pulled back into spec. The 2016 model has to have the rear body panel and the trunk floor removed to replace a damaged rail.
The quest for higher mileage has impacted collision repair and has resulted in higher insurance repair costs. We likely have not seen the full effect on auto insurance premiums because of how collision premiums are calculated. Many carriers rely on the previous model’s cost experience and alter costs as results come in. With such radical changes happening so quickly, insurers are potentially underrating the risk.