As it relates to the automotive claims and collision repair industries, information technology has the potential to change where and how we do business. As we’re finding out, modern information technology processes are driving several industry aspects.

Setting the Insurance Marketplace
Until recently, the drive to enhance electronic information infrastructures seemed to be relatively low for the insurance industries—a direct result of companies ramping up their technology to cope with Y2K and the Internet sprawl. Following that round of improvements, ‘Return on Investment’ became a key, said Robert Hyle, associate editor of TechDecisions for Insurance magazine.

“A number of companies invested in policy administration systems, which are neither cheap nor quickly installed,” said Hyle. “They are looking long range at what the technology can do to improve their operations.”

Part of the operations improvement over the course of the next five years to 10 years in the insurance industry will come from a variety of projects, including: data mining, data warehousing and business intelligence. This seems to be a trend that is already underway, with 75 percent of the nation’s carriers putting their information technology to work through data projects for 2006.[1]

“Insurance carriers have always been known for collecting huge amounts of data and using it in a strategic manner,” added Hyle. “Data mining and predictive analytics are finding their way throughout all departments of the company. Insurers know their data is one of their most important assets and they will be searching for more ways to use it.”

A key part of this data analysis will be to see if they can either support or refute internal ‘best-practice’ business processes carrying over from different divisions within the carrier umbrella, including life and annuity and underwriting. “This will include business intelligence, fraud prevention, marketing new products, customer leads for agents and improved business processes,” said Hyle.

Another area showing promise is wireless technology. While it is a utility that Hyle believes could expand substantially in the next five to 10 years, its effectiveness is dependant on additional outside forces.

“Wireless is an interesting issue,” said Hyle. “Those who use it on a regular basis swear by its effectiveness. Yet adoption among carriers has been slower than what many industry observers have anticipated. People have been waiting for the ‘killer application’ for years and I don’t know if it is coming. That is a definite area of opportunity.”

One element wireless has hurdled is its limitations due to access. “The world has made great strides in wireless communication over the last few years, so it seems likely that adoption will increase,” commented Hyle. “Connectivity no longer seems to be a major issue.”

IT’s Impact on the Collision Repair Industry
The future impact of information technology on the collision repair industry is a multi-pronged question, and makes appearances in virtually all articles of this edition of CCC UpFront. This article adheres to the definition of information technology as the compilation and management of data with the objective of developing a course of action and—ultimately—a result.

The process of gathering collision repair data has played a key role ever since the adoption of the direct repair program (DRP) model, dating back to the 1980s. And while its structure may change slightly during the next five and 10 years, DRPs appear to be here to stay.

Viewed in the past as a task performed for the insurance carrier as part of the DRP, repairers are taking these same metrics and managing their internal operations to combat a host of negative outside influences. Repair facilities nationwide continue to report a decrease in overall net earnings. Among the reasons cited for this downtick include a marked increase in fuel prices, refinish materials and other raw materials costs. There isn’t a better outlook on the horizon on these fronts, either, as repairers report that these economic issues will most likely get worse.[2]

“The increased emphasis on efficiency is something that crosses virtually all business models,” said Jay Baas, CPCU, general manager and president at AutoBody America, “and the collision repair industry isn’t any different. There’s an increased need to understand performance as it relates to cycle time, customer satisfaction, cash flow, employee productivity and vendor management.”

As repair facilities continually increase their utilization of information technology—more than 90 percent of the US repair facilities are communicating electronically—positive benefits may be realized by effectively managing processes, vendors and customer relationships through performance measurement.

One example where data can play a role for the repair facility is the ability to track the performance of parts vendors. Repair facilities can measure key performance indicators such as discount, cycle time (order to delivered), frequency of returns and credit processing. This data can be used to identify those vendors that may be negatively impacting other areas of the business (i.e., profitability, repair cycle time, cash flow, etc.).

“In the coming years,” added Baas, “sharing metrics related to a DRP will be something that repair facilities will view as a business byproduct and not some kind of separate responsibility.”

Mark Fincher is the Autobody Market Solutions Manager at CCC Information Services Inc.

1. “Picking up the Pace,” Robert Regis Hyle, TechDecisions for Insurance Magazine, January 2006
2. “Business Conditions and Repairer Optimism: Fourth Quarter 2005,” CollisionWeek, Feb. 10, 2006