CCC Says Shortage of Repair Technicians Adding to Pressure on Auto Claim Costs

By Jim Sams | November 10, 2021

If a shortage of replacement parts and growing claim severity are not enough to contend with, auto insurers are also coping with a labor shortage among auto repair shops that is driving up claim costs, according to CCC Intelligent Solutions.

A report on demographic trends written by CCC Industry Analyst Susanna Gotsch says that stagnant population growth in the United States is contributing to a national labor shortage for most industries, including insurance. While insurers have been able to use automation to increase efficiency and remote work to expand the talent pool, the auto repair business needs skilled technicians who can work on site.

“At the end of the day, the business is about fixing a car,” Gotsch said Tuesday during a telephone interview. “The problem is that all of that technology that is being built into cars, and it’s harder to repair them.”

The report cites a prediction by the Universal Technical Institute that a wave of retiring baby boomers will create 100,000 auto technician job openings over the next decade. The Bureau of Labor Statistics projects a 4% decline in employment in the auto technician field through 2029.

Gotsch said pressure is building on the industry to increase wages. Her report cites an article in the Philadelphia Inquirer that top auto repair technicians are earning more than $100,000 a year.

Wage inflation is piled on top of shortage of replacement parts caused by pandemic-related supply chain disruptions. CCC reported last month that the average cost for parts increased 6% in 2021 from 2020, the largest increase since 1997.

What’s more, reduced traffic volume on roadways because of pandemic restrictions led to higher speeds and more serious accidents, driving up claim severity, the October report said.

Gotsch said auto repair shops need highly skilled workers, especially with the growth in the number of sophisticated advance driver assistance systems that are included in late-model vehicles. Technicians must be able to carefully review manufacturers’ specifications before they start tearing into damaged cars.

Gotsch cited a story a colleague told her about repairs to a damaged passenger-side door on a pickup. “They cut into the outer shell and touched off a sensor that blew out all of the airbags in the truck.”

The average age of auto repair shop owners shows that the industry needs new blood. A 2021 survey by FenderBender, an industry publication, found that 74% of auto repair shop owners were over 50 and 40% had been in the collision repair industry for 40 years or more. The survey found 30% of the shop owners who responded said they believe a shortage of qualified technicians is repair shop operator’s greatest challenge.

Of course, the entire US economy is dealing with similar problems. The report says part of the reason is that US population growth has slowed to a crawl. Results from the 2020 Census will be released over the next several months, but early estimates suggest that the nation’s population increased just 0.35% from 2019 to 2020, the lowest rate of growth since 1900. Gotsch said the number of births in the US has declined every year since 2008, with the exception of 2014.

While the population of working-age people was growing 2.5% annually in the 1970s, the growth rate slowed to 0.5% from 2008 through last year.

Also, fewer people want to work. The labor participation rate fell from 63.3% from February 2020 to September 2021 — removing 4.3 million workers from the labor force, the report says. A report by the Federal Reserve bank in Kansas City says that the a decline in the number of retirees returning to work drop up the non-working population by 3.6 million from February 2020 to June 2021.

Fewer workers drives up labor costs. The Federal Reserve Bank of Atlanta reported that the three-month moving average wage increased 4.7% in September 2021. A report that included all of the Federal Reserve districts found that employers reported using more frequent raises, bonuses, training, and flexible work arrangements to attract and retain workers.

Politicians and economists are debating whether inflation will continue to rage or resume to more modest levels as pandemic supply chain disruptions subside. Gotsch said she offers no prognosis on that point. But she says the situation at present is clear.

“People are hard to find,” she said. “You are having to pay more to attract people.”

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