Blog: Building a more sustainable approach to motor claims

Insurance is by its nature reactive. Lloyds of London came after the losses to shipping not before. Motor insurance was created after the motor vehicle. It’s unlikely that insurance will lead the sustainable charge but with vision it might be a facilitator. The time for simply swapping plastic cups for paper in the staff canteen is past. Time to examine our products through new lenses and help customers understand how insurance could be sustainable.

Motor insurance is well placed to rapidly apply beneficial new practices to existing processes as there exists an off the shelf solution. There is a maturing parts reclamation infrastructure formed of a proven network of professional recycling companies skilled in removing, cataloguing, establishing the provenance of and quickly distributing reclaimed parts.

Over 20% of motor claims result in total loss. In environmental terms the carbon sunk into creating the vehicle goes largely to waste often for economic rather than safety reasons. The economic calculation might tip even further to the waste side if Brexit impacts parts availability and cost and as carbon-burning vehicles lose value as 2030 and the end of petrol/diesel vehicle sales approaches. Total loss is well named. Customers are deprived of mobility, insurers of a customer, repairers of a repair and carbon is expended to replace the vehicle. Surely reclaimed parts have to be nearer the top of claims toolkits? Covid-19 increased the use of reclaimed parts and it is hoped that insurers get hooked on this solution.

A reclaimed part is an original equipment manufacturer part that could have been in the same bin on the same production line when the vehicle was manufactured. Adding the ‘green’ considerations then their use seems pretty compelling. What’s holding us back?

Engineers regale how historically the delivery and accuracy of reclaimed parts was unreliable and pre-work was required before fitting. Such issues are rapidly disappearing in the rear-view mirror. Hurtling towards us is rampant new parts inflation and concern about the environment that will increase in biproduct to the exhortations to go electric. New problems, new solutions. Engineers would update their advice were they to visit and experience the impressive processes at reclamation companies.

New claims are categorised as repair or total loss with accuracy. Total losses journey to settlement via a ‘total loss team’. Does that momentum to write off become unstoppable? Perhaps a rethink is required.

Reputational damage is often touted as a hurdle. If insurers conceal the use of or force reclaimed parts on customers, reputation will suffer. However modern claims teams are used to involving the customer in decisions, explaining and listening to feedback. Here’s a new tool with which to help customers who are already demonstrating receptiveness to the leaders in the market.

There’s a view that reclaimed parts stimulate theft. It’s not beyond the wit of the industry to overcome this with robust standards, policies and digitally supported provenance systems?

An unintended consequence of the relationship between insurer and repairer is the business model of some bodyshops predicates upon margins earned fitting new parts. Rightly, margin fears impact on repairer ability to change. They perceive cost added to rigid contracts that have had margin paired back over the years. Procurement teams can address  this and facilitate repairers to thrive in the new environment.

There are powerful forces in the market to whom increased use of reclaimed parts is anathema. It’s important that claims managers understand their motives when researching this opportunity. Reclamation gives insurers a route to positive market disruption where they currently lack clout.

Companies on the journey are evangelising the effects reclaimed parts can have on costs, total losses ratios, customer satisfaction and, not insignificantly, claims team pride in their contribution to a wider wellbeing. The UK has vast stocks of parts that can be farmed from end-of-life and crashed vehicles safely, efficiently and sustainably. As the head of deliverance from Twenty Twelve would say: “That’s all good then.”

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