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® Volume Eight Number Four Q4 2008 Published by Mitchell International, Inc. Industry Trends Report In this issue: Quarterly Feature: The Economy & Short-Term Mitchell Collision Repair Customer Satisfaction & Energy Outlook Industry Data Loyalty Facts-at-a-Glance Are Estimates Current Events in the Collision Average Appraisal Values Total Loss Industry Supplements Canadian Collision Summary Finalized at the Parts Analysis Motor Vehicle Markets Casualty Statistics Paint & Materials Vehicle More New Vehicle Sales About Mitchell Used Vehicle Sales Labor Analysis Mitchell News Releases Accurate? Price Movements by Market Class Adjustments Mitchell Brand Advertising at Work SPECIAL EDITION Alex Sun President and CEO, Mitchell International, Inc. Welcome to the NACE Edition of the Industry Trends Report If this is your first experience with theIndustry Trends Report—welcome. I hope that you will become a regular reader and continue to use this publication to stay up to date on the critical trends and topical issues that are impacting the auto collision marketplace. And in today’s challenging environment, the power of information is more important than ever. The unprecedented economic climate that we unfortunately continue to experience is no doubt challenging the way collision repairers, auto glass repairers and other service providers operate—both on a day-to-day and long-term basis. There is a combination of harsh factors at work that are beyond our control. Just this year alone, high fuel prices have caused people to drive 52.0 billion fewer vehicle miles than last year, bringing this year’s estimate to 1692.9 billion vehicle miles driven, which, in turn, is reducing the likelihood of auto accidents. In addition, the general economic malaise affecting many consumers is driving a trend toward delaying repairs for those cars that are involved in accidents. Thus, for many of us who provide collision repair services, this means less demand for our services and more competition for the work that is out there. While reduced claim frequency should benefit insurers, many are experiencing rising loss adjustment expenses as well as the fallout from the downturn in the investment market. Coupled with intense top line pressure that accompanies a weak economy and ‘soft market’ for insurance, it is undeniable that insurance companies too face great challenges. And while we may see a slight reduction in gas prices in the short term, a prolonged recession will likely dampen any recovery one could hope to see in either miles driven or increased purchases (be it for autos or auto insurance). Despite all these challenges, opportunities do exist for businesses to do well. Those businesses that can adapt and operate through challenging times will find themselves in better shape as the market recovers. They will be operationally more ‘fit’ and will find themselves with fewer competitors. As it relates to use of technology, we see greater automation, tighter integration with supply partners and better use of data as critical themes for the next few years. Indeed, now more than ever it is important to try to understand what is happening around you and use that information to better how you operate and adapt in these challenging times. Industry Trends Report is just one way Mitchell works to bring timely and insightful information to our clients and partners. For those of you who are regular subscribers, I hope you feel the same. For those of you who are for the first time reading this report, I urge you to become a regular reader and keep yourself informed. Just let your Mitchell Sales Representative know you want to receive it, and—four times a year—you will automatically receive an e-mail that lets you read it online. We hope you continue to enjoy your experience with this Report and with the company that brings it to you—Mitchell. Best wishes for a productive and enjoyable NACE. Alex Sun President and CEO Mitchell International SPECIAL EDITION Mitchell Industry Trends Report 2 The Industry Trends Report is a quarterly snapshot of the auto physical damage Industry Trends collision and casualty industries. Just inside—the economy, industry highlights, plus illuminating statistics and measures, and more. Stay informed on ongoing and emerging trends impacting the industry, Report and you, with the Industry Trends Report! Volume Eight Number Four Questions or comments about the Industry Q4 2008 Trends Report may be directed to: Published by Mitchell International, Inc. Greg Horn Editor in Chief, Vice President of Industry Relations [email protected] For distribution and circulation questions, or requests for back issues, please contact: Regina Merkey Managing Editor, Marketing Communications Specialist Distribution and Circulation (858) 368-7790 e-mail: [email protected] Table of Contents Additional Contributors: Manheim analytics provided by Thomas 4 Quarterly Feature : Are Estimates Finalized at the Vehicle More Accurate? C. Webb, Chief Economist at Manheim 8 The Economy & Short-Term Energy Outlook Auctions. Webb has been associated with the used vehicle market for more than 26 10 Current Events in the Collision Industry years, including serving as Senior Manager 17 Motor Vehicle Markets at a professional services firm’s global New Vehicle Sales automotive practice, and Chief Economist Used Vehicle Sales for one of the industry’s largest national trade organizations. 19 Mitchell Collision Repair Industry Data Average Appraisal Values Collision Losses Comprehensive Losses Third-Party Auto Property Damage Supplements Parts Analysis Paint & Materials Labor Analysis Adjustments The Industry Trends Report is published by Mitchell International, Inc. Total Losses 25 AutocheX White Paper Abstract: Building an Action-Based Customer ® Loyalty Program 25 Customer Satisfaction & Loyalty Facts-at-a-Glance 27 Total Loss The information contained in this publication was obtained from sources deemed reliable. 28 Canadian Collision Summary However, Mitchell International, Inc. cannot Canada Appraisal Severity guarantee the accuracy or completeness of Canada Parts Utilization the information provided. Vehicle Age and ACV’s 32 Collision Casualty Statistics 33 About Mitchell International, Inc. News Releases Q3-2008 Mitchell Brand Advertising at Work Mitchell International is a leading provider of information, workflow, and performance management solutions to the automotive insurance and collision repair industries—serving carriers, collision shops, and other commercial participants in the physical damage, auto-related and workers’ compensation medical claims markets. Mitchell facilitates millions of electronic transactions between more than 25,000 business partners each month to enhance their productivity, profitability, and customer satisfaction levels. For more information on Mitchell International, please visit our website at www.mitchell.com. Mitchell Industry Trends Report 3 Quarterly Feature Are Estimates Finalized at the Vehicle More Accurate? BY GREG HORN Vice President of Industry Relations, Mitchell International When I began estimating (in 1987 for those keeping score at home), my supervisor drilled About the author… into all of the trainees that our estimates needed to be completed or “committed” at the vehicle and uploaded there as well. This became a challenge when the calculation of the Greg Horn estimate required a mainframe communication session to finalize the estimate. (I can even Vice President of Industry Relations, recall balancing the briefcase-sized estimating equipment in a phone booth while pushing Mitchell International the hand set into the equipment in order to complete the calculation. Our estimating Greg Horn joined Mitchell equipment has come a long way, but I digress.) My supervisor’s logic was simple—the International in September of estimate would be completed as soon as possible. His overall claims file strategy was just 2006 as Vice President of Industry as simple: “Do everything possible to close a file as soon as you first open it.” Relations. In this role, Greg assists the Mitchell sales force in providing I have seen the benefit of this claim appraising strategy in cycle time and assumed that the custom tailored business solutions to estimates completed at the vehicle were more accurate than estimates where notes and the auto collision industry. photos were taken and the estimate completed “back at the office.” It just seems logical He provides guidance to Mitchell’s that questions that come up during the creation of the estimate can be more accurately Product Management and Business answered when looking at the vehicle being appraised. I have been a strong proponent Analytics teams, playing an important of this appraisal strategy and have made it a key performance metric of appraisers I’ve role in shaping Mitchell’s solution worked with. However, this isn’t the only estimating strategy that I found to be successful. portfolio to ensure that it meets Another strategy I have been a proponent of is questioning what we take for granted as the evolving needs of current and future clients. Greg also presents logical conclusions. What a perfect opportunity to verify two long held beliefs! Mitchell’s Industry Trends Updates at The Sample conferences across the country. We began by pulling a total sample size of 864,119 repairable staff-written estimates Prior to joining Mitchell, Greg served that were committed within 48 hours of the estimate being started. The average final as Vice President of Material Damage severity