Winter 2009

Audatex
Directions
News from Audatex North America, Inc. Vol 04
What Drives
Hybrid Repair
Costs?
Industry professionals are already aware that
hybrids generally cost more to repair than
their gasoline counterparts. The question is,
“How much more?”
ALSO IN THIS ISSUE
> Shop View: Making the Journey to a Lean Shop
> A Look into Future Technology:
Electric Vehicles and License-Plate Scanning
> Much More
Audatex Directions
Audatex Directions is a quarterly
newsletter that provides in-depth trends
and industry analysis on the auto physical
damage market. It is published by Audatex
North America, Inc., a Solera Company.
Editor
Kate Los
Corporate Communications Manager
Contributing Writers
Michael T. Anderson
Sr. Director of Data Analytics, Audatex
Tanya Elkins
Product Manager, Autosource, Audatex
Diane Klund
Regulatory Compliance Manager, Audatex
Contents
3
4
9
Managing Director’s Message
Feature Article
– What Drives Hybrid Repair Costs?
Industry Trends
–Are Electric Vehicles the Answer?
–Vehicle Sales and Actual Cash Values
–Staying On Top of Vehicle-Value
Charles Lukens
CEO, APU Solutions
Krishna Masur
Lean Six Sigma Black Belt, Audatex
Dave Trissel
Associate VP of Process Excellence,
Audatex
Brian Vannoni
Sr. Director, Product Management, Audatex
Request Copies
To request a printed copy of this publication,
please email: [email protected]
To download the pdf, please visit our
Web site: http://audatex.us/thinktank.aspx
Fluctuations
15
Shop View
–Making the Journey to a Lean Shop.
Part 1: Why Lean? Why Now?
17
A Look into Future Technology
– Auto Thieves’ Newest Opponents:
License-Plate Scanners
18
Regulatory Highlights
– Total Loss Changes on the Horizon
in the Northwest U.S.
– New York Kicks Off 2009 with a
New Flex-Rating Program
21
Industry Collaboration
– Audatex and APU to Launch
Integrated Recycled-Parts
Procurement Solution
– Repairers and Insurers Guide
Inaugural Meeting of Audatex
Technical Advisory Council
23
Audatex News and Events
– Audatex’s Parent Company
Strengthens Its Global Leadership
Through the Acquisition of Two New
Companies
–Revamped Online Training Center
Will Help Users Unleash the Power of
Their Audatex Solutions
– In Memoriam:
Wadine Traylor-Freeman
– Upcoming Events
Local focus. Global knowledge.
Audatex is the leading global claims
solutions provider. As part of the Solera
group of companies, we draw on our broad
global claims market experience to identify
and implement the best-practice processes
that drive continuous improvement for our
local customers and their trading partners.
Solera companies serve the automotive
industry in more than 50 countries across
six continents.
© 2009 Audatex North America, Inc. All rights reserved.
Audatex, AudaInsight, Autosource, Audatex Estimating,
Audatex Win-EMR, PenPro and Shoplink are trademarks or
registered trademarks of Audatex. All other company
and/or product names may be trademarks or registered
trademarks of their respective owners in the United States
and other countries.
Managing Director’s Message
Positioning Yourself for Success in 2009
While 2009 holds the promise of a new year, it also brings about some uncertainty of
what’s to come. But, one thing is clear—2009 will demand that you approach business in
an informed, strategic and disciplined manner.
With this edition of Audatex Directions, we aim to provide insight that will help you prepare
for success in 2009. We do so by first digging deeper into key industry trends that may
impact your business. In our feature story, we look at the factors influencing hybrid repair
costs and what this can mean for your bottom-line. We then examine how a changing
economy can influence vehicle sales and values and how you can stay on top of these
fluctuations. Looking ahead, we explore how up-and-coming innovations like electric
vehicles and license plate-scanners may impact your business in the future.
Recognizing that in 2009 efficient business processes will be more important than ever, we
are introducing a series of articles that explore how proven Lean Six Sigma methodologies
can be applied to collision repair, ultimately helping to improve shop productivity,
customer satisfaction, and business-growth potential.
As the year 2009 commenced, so did changes on the regulatory front. To help you stay on
top of these changes, we’ve included details around total loss regulation in the Northwest
U.S. and a new flex-rating program in New York.
‘‘
’’
With this edition of
On the Audatex news front, we report on initiatives that will help us best serve you in your
quest for success. Read about our parent company’s strategic acquisition of companies
whose solutions could potentially aid in additional markets. Learn how we’re teaming up
with APU Solutions to deliver a powerful search and procurement solution that will help
you maximize the use of recycled parts. See how our collaboration with users in the new
Audatex Technical Advisory Council will help us deliver solutions that best meet industry
needs. And, learn how you can ensure you’re getting the most from your investment in
Audatex solutions by leveraging the newly revamped Audatex online training center, which
is coming this month.
Finally, please take a moment to read the tribute to Wadine Traylor-Freeman, our colleague
who passed away last fall after a brave battle with cancer. Wadine has left a lasting
impression on her colleagues, not only because of her 25 years of impressive work, but
more importantly because of her warm personality and genuine care for others.
She will not be forgotten.
Regards,
John Kotsopoulos,
Managing Director
Audatex North America, Inc.
www.audatex.us
Audatex Directions,
we aim to provide
insight that will help
you prepare for
success in 2009.
3
Feature Article
What Drives Hybrid
Repair Costs?
I n d u s t r y p ro f e s s i o n a l s a re a l re a d y a w a re
t h a t h y b r i d s g e n e r a l l y c o s t m o re t o
re p a i r t h a n t h e i r g a s o l i n e c o u n t e r p a r t s .
T h e q u e s t i o n i s , “ H o w m u c h m o re ? ”
By Michael T. Anderson
When comparing hybrids to gasoline-powered
vehicles, many look very much the same.
However, hybrids are much more complex and
have traditionally cost more to repair. Because
hybrid sales represent a growing percentage of
new vehicles sales, these increased costs have
been a concern for many. And, although recent
reductions in fuel costs and a lagging economy
caused hybrid sales to drop 10 percent in late
2008 compared to 2007, they still represented
2.6 percent of new car sales in October 2008.
As a result, companies must take a closer look
at the underlying factors driving hybrid repair
costs, such as their unique qualities, the limited
availability of alternative parts, and the
opportunity for more consistent appraisal
practices.
Hybrid Claim Distribution
As fuel prices reached record levels in recent
years, the need for more fuel efficient vehicles
forced manufacturers to develop new hybrid
vehicles or create hybrid cross-over versions of
existing gasoline models. Since its introduction
to the U.S. market in 2000, the Toyota Prius has
led all hybrid car sales, and in 2008 it entered
into the top 10 of all vehicles sold. Not
surprisingly, during 2008, the Prius also
represented the majority of hybrid insurance
claims (figure 1).
Claim Distribution by Hybrid Model in 2008
7%
3% 4%
6% 4%
11%
51%
15%
Toyota Prius
Honda Civic
Toyota Camry
Toyota Highlander
Lexus RX 400h
Ford Escape
Honda Accord
Other (17 models)
Figure 1: Hybrid claim distribution in 2008 by
model type as a percentage of all hybrid claims.
(Source: Audatex® Insight™)
Continued next page
4
Audatex Directions
Vol 4
Feature Article
C o n t i n u e d f ro m p re v i o u s p a g e
As the prevalence of hybrid vehicles increases in
terms of both numbers produced and models
offered, claim and underwriting professionals will
need a better understanding of repair costs and
influencing factors.
Hybrid vehicles that have a gasoline counterpart
averaged 3.8 percent more to repair on a weighted
basis than their comparable gasoline-only models
(figure 3).
Repair Costs by Model Year:
Hybrids versus Gasoline Equivalents
Average Repair Costs
Industry professionals are already aware that
hybrids generally cost more to repair than their
gasoline counterparts. The question is, “How
much more?” To better answer this question,
we performed two separate analyses.
$2,900
$2,700
$2,500
$2,300
$2,100
$1,900
$1,700
$1,500
• In the first analysis, we examined average
repair costs for the Toyota Prius relative to
the gasoline-powered economy-import class.
Sixty-eight percent of this class is comprised
of the Honda Accord, Honda Civic, Toyota
Corolla, Nissan Sentra, and Hyundai Elantra.
• The second analysis isolated hybrid crossover vehicles that have a gasoline counterpart.
The comparisons for this hybrid population
were made directly to their gasoline
counterparts.
In our first set of analyses, we found that on
average in 2008, the Toyota Prius cost
8.4 percent more to repair than the gasolinepowered economy imports (figure 2).
2003 2004
Hybrid
2005
2006 2007
2008
Gas Equivalent
Figure 3: Average
repair costs by model
year for hybrid vehicles
versus their gasoline
counterparts.
(Source: Audatex Insight)
A review of repair costs over time suggests that
greater differences exist in early model years,
while the repair costs for newer model years are
nearly identical. As discussed in the following
section, specific factors are driving these trends.
Part-Dollar Distribution
To explore the underlying factors influencing
higher hybrid repair costs, we reviewed the partdollar percentage for each of the four standard
part classifications (OEM, aftermarket,
recycled and other) represented in terms of
Repair Costs by Model Year:
total part dollars.
Toyota Prius vs. Gasoline-Powered Economy Imports
$2,900
$2,700
$2,500
$2,300
$2,100
$1,900
$1,700
$1,500
2001 2002
2003
2004 2005
2006 2007
Prius Average Repair Cost
Economy Import Average Repair Cost
Figure 2: Average repair costs by model year
for the Toyota Prius versus gasoline-powered
economy imports. (Source: Audatex Insight)
2008
Part-Dollar Distribution:
Toyota Prius versus Gasoline-Powered
Economy Imports
To begin, we examined the Toyota Prius
versus gasoline-powered economy
imports. As shown in figure 4 (on the next
page) OEM part utilization is much higher
on the Prius.
Why is OEM part utilization so much
higher in the Prius? Consider this—the
Prius was introduced to the U.S. market in 2000,
and it took nearly five years to reach 330,000 units
sold. It wasn’t until 2005 that Toyota sold more
than 100,000 units in a single year. The limited
number of unit sales during these early model
years now directly impacts aftermarket and
recycled part availability.
Continued next page
www.audatex.us
5
Feature Article
C o n t i n u e d f ro m p re v i o u s p a g e
because in the 2003, 2004 and 2005 model
years, the majority of hybrid claims were for the
Honda Civic Hybrid, which has many
interchangeable parts with its gasoline-powered
counterpart and therefore allows for greater
usage of alternative parts in the repair process.
Part-Dollar Distribution: Prius versus Gasoline-Powered
Economy Imports (as percentage of total dollars spent)
OEM
2001
2002
2003
2004
2005
2006
2007
2008
Aftermarket
Prius
Economy
Import
75
76
81
81
84
86
89
95
52
55
59
63
66
73
83
93
Figure 4: A comparison of
part-dollar distribution shows
a significantly higher
utilization of OEM parts in
early-year Prius models
compared to gasolinepowered economy imports
(highlighted in orange).
(Source: Audatex Insight)
Prius
Economy
Import
4
4
3
7
7
6
5
4
17
16
14
14
13
10
7
4
Recycled
Other
Prius
Economy
Import
Prius
14
14
8
8
5
4
3
0
26
23
20
17
16
12
6
2
7
6
8
4
4
4
3
1
Economy
Import
5
6
7
6
5
5
4
1
Overall, the ability to identify, locate and
subsequently provide alternative parts that are
unique to a hybrid cross-over (i.e., not shared by
the gasoline counterpart) requires a precise partinterchange process, accurate inventory records
by the recycler and, frequently, extended part
searches by appraisers.
As fuel prices rose during 2006 through 2008,
Prius sales exploded, doubling the previous
OEM Part Costs
five-year total. Cumulative sales now exceed
We examined some commonly replaced parts
one million vehicles. Not surprisingly, claim
and compared the OEM price for hybrid parts
frequencies are also skewed towards these
versus gasoline parts based upon year, make,
newer model years. In 2008, 66 percent of
model and specific part. While many of the
all Prius claims were for model year 2006 or
hybrid parts cost the same as their gasoline
higher. In contrast, only 44 percent of all
gasoline-powered
economy imports
fell into this range.
Part-Dollar Distribution: Hybrids versus Gasoline Counterparts
This skew toward
(as percentage of total dollars spent)
newer Prius
models, along
with insurer part
policies and
limited alternativepart availability, all
impact OEM part
percentages.
OEM
2003
2004
2005
2006
2007
2008
Aftermarket
Recycled
Other
Hybrids
Gasoline
Hybrids
Gasoline
Hybrids
Gasoline
Hybrids
63
70
74
84
89
94
56
59
66
73
84
93
15
16
12
7
5
4
16
17
14
11
7
4
15
9
9
4
3
1
22
18
14
10
6
1
7
6
5
5
4
1
Part-Dollar
Distribution:
Hybrids versus their Gasoline-Powered
Counterparts
In our second set of analyses, we looked at
part-dollar distribution for hybrids versus their
gasoline-powered counterparts. As seen in
figure 5, hybrids also have higher OEM part
percentages than their gasoline counterparts,
but the difference is notably less than that seen
with the Prius (as seen in figure 4).
There is a specific reason why the differences
between OEM part usage for these hybrids
versus their counterparts are not as great as
those for the Prius versus economy imports. It is
Gasoline
Figure 5: A comparison of part-dollar distribution
shows a higher utilization of OEM parts in earlyyear hybrids versus their gasoline counterparts
(highlighted in orange), but the difference is not as
great as seen with the Prius (as seen in figure 4).
(Source: Audatex Insight)
counterparts, some significant differences exist
at the part level that impact alternative-part
availability and overall repair costs (figure 6).
For the majority of parts with significant OEM
price differences, the discrepancy can be traced
directly to new (and frequent) design changes
that are made by manufacturers in efforts to
Continued next page
6
Audatex Directions
Vol 4
5
6
6
6
4
2
Feature Article
C o n t i n u e d f ro m p re v i o u s p a g e
reduce hybrid vehicle weight or better
accommodate the hybrid system. For example,
many manufacturers developed variations of a
dual-scroll air-conditioning compressor that
utilizes two compressors in one—a
conventional, belt-driven scroll compressor for
when the vehicle is running on gasoline power
and a smaller, electric compressor for when the
vehicle is running on battery power. The new
hybrid compressor technology represents a
$200 part-price difference compared to the cost
for a compressor used in gasoline only models.
Depending on the model year and vehicle, other
costly modifications (i.e., modifications
representing a greater than $100 per-part
difference) include incorporating aluminum
hoods and fenders, aluminum bumper rails,
modified airbag control modules, redesigned
grills and head lamp/tail lamp assemblies and
radiators to support the hybrid system. These
subtle design differences can result in higher
part prices, repair costs and limited alternativepart availability.
Average OEM Part Cost by Model Year:
Hybrids vs. Gasoline Equivalents
$140
$120
$100
$80
$60
$40
$20
$0
2003 2004
Hybrid
2005
2006 2007
2008
Gas Equivalent
Figure 6: Average OEM part cost by model
year for hybrids and their gasoline equivalents.
(Source: Audatex Insight)
Labor Rates and Labor Hours
Labor ratios and rate variances also impact
repair costs for hybrids. As seen in figure 7,
when comparing the weighted-average labor
cost for hybrids versus their gasoline
counterparts and gasoline-powered economy
imports, hybrid claims yield both higher labor
hours and rates.
The variance in sheet metal labor hours is
explained, in part, by the repair versus replace
ratio. Hybrid
vehicles have an
Percent Variance in Labor Rates
average sheetand Hours for Hybrids
metal-repair ratio
16.0%
of 42.7 percent,
14.0%
14.6%
while their
12.0%
gasoline
10.0%
10.1%
counterparts and
8.0%
gasoline-powered
6.0%
economy imports
4.0%
5.1%
have an average
4.4%
3.9%
2.0% 4.0%
repair ratio of
1.4%
0.0%
-4.1%
40.6 percent.
-2.0%
Repair
-4.0%
percentages and
-8.0%
Refinish
Sheet Metal Mech/Elec
Frame
labor hours for
hybrids were
Percent of Change - Hours
Percent of Change - Rates
higher during
model years 2001
Figure 7: Percent
through 2005, and these figures subsequently
variance of labor rates
declined in 2006 through 2008, at which point
and hours for hybrids
they reflected nearly identical results to
versus the baseline seen
for their gasoline
comparable gasoline vehicles.
Compared to non-hybrids, hybrid labor rates
were on average $1.74 per hour higher for
refinish work, $1.71 per hour higher for sheet
metal, $6.42 per hour higher for
mechanical/electrical and $2.12 per hour higher
for frame work. A portion of these results is
reflective of the geographic distribution of
hybrid vehicles in the U.S. (figure 8 on next
page), and the higher costs of repairs in those
areas, as well as the higher percentage of
dealership repairs, and increased insurerapplied electrical labor rates on hybrid
estimates.
counterparts and
gasoline-powered
economy imports.
(Source: Audatex Insight)
As illustrated in figure 7, the biggest difference
is seen for the shift in mechanical/electrical
labor hours. Data suggests this increase may be
due to several contributing factors, including the
increased frequency and hours needed to
disconnect and reconnect a hybrid battery, as
well as the increased hours and other items
such as the rates that are applied to reset
Continued next page
www.audatex.us
7
Feature Article
C o n t i n u e d f ro m p re v i o u s p a g e
The parts analytics
module in the
Audatex Insight
electrical components in hybrid vehicles. The
time allowed to reset electrical components in
hybrids takes on average .52 hours versus
.46 hours for gasoline vehicles, or $7.00 more
per claim. A review of electrical-related,
manually-entered line-item entries shows there
are opportunities for insurers and repairers to
better leverage their estimating system’s
automatic entries versus manual entries, as well
as for more consistent definition and application
of hours and rates for hybrid-specific electric
operations.
business
intelligence tool can
greatly assist your
organization in
understanding lineitem, part-level and
States with the Most Hybrid Sales
Rank
State
1
California
New Hybrids*
2
New York
67,923
15,435
3
4
Texas
Florida
14,430
14,387
5
Illinois
11,252
*Year to date - October 2008.
(Source: Hybridcars.com)
Figure 8: States with the most
hybrid sales as of October 2008.
behavioral trends
Hybrid Trends, Moving Forward
and variances.
• Labor rates on electrical-related procedures
tend to be higher and inconsistently applied
for hybrid vehicles.
• Use of aluminum (light weight) panels on
hybrids changes the repair process.
Traditional steel panels have “memory”
allowing for standard repair versus replace
decisions. Aluminum is a softer metal and
does not have the repairability characteristics
that steel offers.
As additional cross-over vehicles enter the
market and more alternative parts become
available for hybrid-only models, insurers should
see hybrid repair costs fall more in line with their
gasoline counterparts. However, it remains
important for insurers to understand how
vehicle-specific design differences can impact
loss costs. This requires insight to part-level
data and an effective alternative-parts strategy.
The parts analytics module in the Audatex
Insight business intelligence tool can greatly
assist your organization in understanding lineitem, part-level and behavioral trends and
variances. For more information on Audatex
Insight, visit
http://audatex.us/insurance_solutions/
reporting_solutions.aspx. n
Despite the recent decline in sales, automakers
are more committed to hybrids than ever.
Toyota, Honda, General Motors, Ford and
Chrysler all announced continued plans to
aggressively expand their hybrid-vehicle
markets. In fact, General Motors announced
plans to have 15 hybrid models by 2012 and
other manufacturers are investing heavily in the
electric-vehicle market.
As such, the following factors that drive
increased hybrid repair costs should be kept
in mind.
• Until a more significant market share is
obtained by hybrid vehicles, a higher
percentage of hybrid-vehicle-only claims
(versus cross-over-vehicle claims) may limit
alternative-part availability for several years to
come.
• Subtle, yet costly, design changes on crossover vehicles increase part prices and
negatively impact the availability of hybridspecific parts.
8
Audatex Directions
Vol 4
Industry Trends
Are Electric Vehicles
the Answer?
By Michael T. Anderson
It is estimated that in 2007 vehicles on U.S.
roads consumed in excess of 140 billion gallons
of gasoline. Although hybrids offered vehicle
owners some relief from the record-high
gasoline prices seen in 2008, manufacturers
and venture capitalists across the globe
recognize the severity of the situation and
continue to search for true fossil-fuel
replacements. Thus, the crucial question for all
those involved in the automotive industry
remains—“What will power vehicles in the next
two to five years?”
The answer is that we will likely see a
combination of combustion, hybrid, hybrid
cross-over and extended-range electric vehicles
(EVs) in the near future. This diversity will surely
create new challenges for manufacturers,
insurers and repairers alike. Consider, for
instance, that only now—10 years after the
Honda Insight became the first mass-produced
hybrid car introduced to the North American
market—do we see the true extent to which
hybrids impact claim costs, traditional repair
processes and even underwriting assumptions.
And that’s just one type of alternative vehicle.
Today’s Hybrids
Today’s hybrids combine the power from a
gasoline-based internal-combustion engine with
electricity derived from batteries in an electric
motor. So, for all intents and purposes, they are
gasoline-powered vehicles that run on battery
power for very short periods of time. And while
hybrids deliver much promise to the automotive
market, many studies show that their increased
costs are often disproportionate to their
associated fuel savings. This paradigm
motivates manufacturers to continue pursuing
extended-range EVs, especially when the price
of oil falls.
Electric Vehicle Challenges
General Motors, Mazda, Nissan, Toyota, Mini,
Subaru, Hyundai and Volkswagen have all
announced their intent to deliver several EV
models in the next few years. So consumers
may soon have several EVs available at their
local dealerships. Extended-range EVs, such as
the Chevrolet Volt, will be propelled primarily by
an electric motor powered by rechargeable
lithium-ion battery packs, with a gasoline
internal-combustion engine as a backup power
source.
Continued next page
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9
Industry Trends
C o n t i n u e d f ro m p re v i o u s p a g e
Figure 1. The figure shown here is based on a map
developed by Venkat Srinivasan – a researcher at
the Lawrence Berkeley National Laboratory's
Environmental Energy Technologies Division. It
compares the specific energy (in watt-hours per
kilogram) of vehicle power sources, an indicator of
their range, with their specific power (in watts per
kilogram) an indicator of acceleration. Dotted lines
indicate acceleration and cruise times, while blue
stars show the Department of Energy’s energy and
power goals for electric vehicles and hybrids.
Internal combustion engines still out-perform all
other power sources, but battery researchers are
confident that they can improve the profile of
lithium-ion batteries substantially.
(Image and caption source: Environment Energy Technologies
Division News Report from the Lawrence Berkeley National
Laboratory, Fall Newsletter, Volume 7, Number 4).
While promising, four significant challenges
remain for manufacturers:
• weight
Some experts say
if a battery needs
• distance
• longevity
• cost
to be replaced,
costs could be as
high as $10,000 for
today’s short-range
lithium-ion batteries
and future batteries
with a potential
range of up to
200 miles may
cost in excess of
$15,000.
10
The lithium-ion “T” battery pack that will power
the Chevrolet Volt weighs 400 pounds and is one
of the most advanced battery packs ever
designed; however, it will only enable the Volt to
travel a distance of 40 miles. This is because
lithium-ion batteries generate only about onetwenty-fifth of the energy produced by gasoline.
As a result, manufacturers must discover new
ways to generate more energy from the lithiumion batteries.
Researchers have tried—with limited success—
to improve lithium-ion energy output through a
variety of approaches, such as alternative lattice
configurations, chemical and structural changes,
and creation of multiple storage systems with
varying power densities.
The uncertain longevity of lithium-ion batteries is
of equal concern and also creates potential
liability and warranty risks to manufacturers.
Batteries are highly complex, containing billions
of molecules, ions and electrons within a
sophisticated, and sometimes volatile, system.
To minimize risk, highly complicated cell-
management systems have been developed, but
these systems add considerable costs to the
vehicle. Some experts say if a battery needs to
be replaced, costs could be as high as $10,000
for today’s short-range lithium-ion batteries and
future batteries with a potential range of up to
200 miles may cost in excess of $15,000.
Managing Change
EVs are highly complex vehicles, and their
intricacy continues to grow as numerous
manufacturers design unique power systems to
reduce weight, increase distance, improve
longevity and manage costs. As EV
specifications are altered in attempts to bridge
the gap between technical feasibility and
commercial viability, manufacturers will introduce
increasingly complex and varied vehicles into
test markets throughout the world. As this
happens, some certainties exist. To begin, both
insurers and repairers will need a greater
understanding of how these vehicles impact
repair procedures, equipment needs, engineering
risks, repair costs, and standard repair
guidelines. As these vehicles enter the market at
greater rates, insurers will likely see increased
repair costs for many of the same reasons seen
with early-model hybrids (see the article “What
Drives Hybrid Repairs Costs?” in this edition of
Audatex Directions). For example, new
technology, greater use of alternative metals,
increased electrical procedures and a lack of
alternative parts will all impact costs.
As the only global service provider currently
serving more than 50 countries, Audatex is well
positioned to provide best practice techniques
for EV damageability and repair, regardless of
where these new vehicles are launched. n
Audatex Directions
Vol 4
Industry Trends
C o n t i n u e d f ro m p re v i o u s p a g e
Vehicle Sales and
Actual Cash Values
By Michael T. Anderson
As consumer credit remains tight, 2009 new-carsales forecasts remain grim. Despite significant
incentive programs, sales at many of the top
automakers fell significantly in November 2008,
as demand fell to a 25-year low. According to
some reports, conservative loan underwriting
restrictions instituted in October 2008 may deny
as many as one out of four car-loan applicants.
In efforts to open up the consumer credit
markets, the U.S. Federal Reserve Board cut the
Value (ACV). As consumer confidence weakens,
unemployment rises and the financial markets
remain uncertain, would-be car buyers have
deferred their purchasing decisions. As a result
there are fewer new (and higher-valued) cars on
the road. As forecasted in Volume 2 of Audatex
Directions, the percentage of estimates identified
as potential total losses continued to slowly
increase through the second half of 2008, after
prior months of decline (figure 1). This is primarily
due to declining trends in ACVs relative to gross
appraisal values (figure 2), an older vehicle
population and, to a lesser extent, seasonality and
slight increases in repair costs.
In October 2008, the Manheim
Index—a key indicator of
pricing trends in the usedvehicle market—showed the
Total Loss Estimates
largest month-to-month and
16%
year-over-year decrease in its
14-year history. While
15%
insurance claims may deviate
14%
from the Index due to
geography and vehicle mix, it
13%
is a widely-accepted measure.
12%
Audatex’s ACV trends are
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
consistent with the Index.
According to Audatex data,
2007 Total Loss Percentage
from September to November
2008 Total Loss Percentage
2008 ACVs declined by
7.3 percent in two months to
a level that was down 5.9 percent as compared
Figure 1: Through the second half of 2008, the
to the ACV in November 2007 (figure 3 on next
percentage of estimates identified as potential total
page).
Figure 2: In late 2008,
ACVs declined from
September’s high as
repair costs incresed,
narrowing the repairability
window.
losses continued to slowly increase, after proir
months of decline.
target for the federal funds interest rate to nearly
zero percent in mid-December 2008. Many
analysts anticipate that this move will stimulate
new home and car sales during 2009, despite
nearly half a million workers having lost their
jobs in November 2008.
So why do new car sales impact the insurance
and repair industry? A major determinant as to
whether an insurer decides to repair a vehicle,
versus declare it a total loss, is the percent of
damages relative to the vehicle’s Actual Cash
Actual Cash Value versus
Gross Appraisal Value in 2008
$2,600
$7,800
$7,600
$2,500
$7,400
$2,400
$7,200
$7,000
$2,300
$6,800
$2,200
$6,600
$6,400
$2,100
$6,200
$2,000
$6,000
Jan Feb Mar Apr May Jun
Industry GAV
Jul Aug Sep Oct
Nov
Industry ACV
Continued next page
www.audatex.us
11
Industry Trends
C o n t i n u e d f ro m p re v i o u s p a g e
Audatex Actual Cash Values versus
Manheim Used-Vehicle Value Index
$7,700
115
$7,500
110
$7,300
105
$7,100
100
$6,900
95
$6,700
$6,500
90
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Audatex ACV’s
Manheim Used Vehicle Value Index
Figure 3: Audatex Actual Cash Values are
consistent with those seen in Manheim Index
of used-vehicle values.
Hardest-Hit Vehicle Types
Figure 4: Audatex ACVs show
that luxury supreme vehicles
comprised mostly of higher-end
European models, large SUVs
and pick-up trucks have suffered
the greatest declines in value.
In tough economic times, logic would indicate
that the used-car market would improve versus
deteriorate. However, only time will tell because
the industry has never before experienced such
dire economic conditions. The lack of credit
available to dealers and consumers is having a
profound impact on used-vehicle sales, values
and inventories. Despite the U.S. Federal
Percent of Change in Audatex ACVs during 2008
(Q1 to Q2)
(Q2 to Q3)
Q3 to Q4
(through Nov. 2008)
Economy Imports
Economy Domestic
-1.5 %
-1.1 %
3.0 %
0.0 %
-2.2 %
-3.7 %
Midsize Foreign
Luxury
-2.9 %
-1.4 %
-2.4 %
-3.3 %
0.7 %
0.8 %
0.9 %
-0.9 %
-2.6 %
-0.5 %
-3.2 %
-2.6 %
Luxury Supreme
Sport
0.2 %
-1.9 %
9.6 %
1.8 %
-12.6 %
-2.0 %
Sport Luxury
0.2 %
-3.7 %
-9.1 %
-9.3 %
6.3 %
-1.0 %
-0.1 %
3.4 %
-3.7 %
-5.6 %
-5.0 %
-3.6 %
-8.4 %
-2.3 %
-2.9 %
1.0 %
0.9 %
-3.1 %
-8.1 %
-8.5 %
-11.0 %
Vehicle Class
Midsize Domestic
Full size
Mini Van
Full size Vans
Small Pick-Up Trucks
Full size Pick-Up Trucks
Small SUVs
Large SUVs
12
Reserve Board taking aggressive actions to free
up the frozen credit markets, consumer
confidence and concerns over unemployment
will continue to restrict many buyers to
purchasing vehicles only out of necessity. While
no vehicles are immune to the recent decline in
values, luxury supreme vehicles comprised
mostly of higher-end European models, large
SUVs and pick-up trucks have shown the
greatest declines in value (figure 4).
What’s to Come?
Higher-value vehicles are taking the largest hit
on ACVs, which seems reflective of the tighter
credit and consumer financing markets. Only
when consumer credit eases, confidence
improves and the backlog of inventories has
sold will the value of these vehicles rise to
normal levels. However, this readjustment will
likely take several months to achieve, depending
on a multitude of economic variables. Economy
and midsize vehicles, while down, remain more
affordable to most consumers, seem to be less
influenced by the limited availability of credit
offered to buyers (on average, $4,500 to $8,000)
and should remain stable in the next few
months. Experts in the wholesale industry
forecast a soft year for most of 2009, with the
likelihood of the typical spring increase.
In the interim, insurers may need to re-examine
their books of business at a more detailed level
in order to understand how this will impact their
percentage of repairable vehicles. Access to
vehicle-specific appraisal and ACV data is the
first critical step in such analysis.
Insurers may also want to consider taking a
closer look at their current total-loss thresholds,
the impact these thresholds have on their totalloss percentages, and how a slight adjustment
would affect not only their overall loss costs, but
also the satisfaction levels of customers who
may not be in a position to purchase
replacement vehicles. n
Audatex Directions
Vol 4
Industry Trends
C o n t i n u e d f ro m p re v i o u s p a g e
Staying On Top of Vehicle-Value Fluctuations
By Tanya Elkins and Michael T. Anderson
Over 40 million used vehicles exchanged hands
during 2008 in the U.S. and Canada. Market
fluctuations and price swings in 2008 had a
material impact on vehicle valuations, thereby
influencing the total-loss-settlement process.
In a highly volatile used-car market, the ability to
provide accurate and timely vehicle values that
are reflective of current market conditions
becomes increasingly important. With the
average Actual Cash Value of used vehicles
declining by $600 between October and
November 2008, the use of fresh data becomes
increasingly important during the settlement of
total-loss claims.
The ability to attain vehicle valuations that are
reflective of current local conditions can be
influenced by several factors, including the:
• frequency of vehicle updates
• method of vehicle updates
• timeliness of the data
changes in vehicle values. In just 60 days, the
industry experienced unprecedented declines
that impacted some market segments by as
much as $800, with an average decline of $600.
With insurers settling thousands of total-loss
claims each month, access to timely market
data from the onset of the settlement process
can impact both loss costs and loss-adjustment
expenses. With frequent fluctuations in today’s
market, access to data that is updated on a daily
basis becomes increasingly important.
Method of Updates
Vehicle information is obtained from numerous
sources, including dealerships, industry
publications and several other sources. The
method through which this information is
updated is just as important as the frequency of
the updates. For example, manually-entered
records can take more time to update and can
be more error prone than electronic updates that
tend to be more timely and accurate.
• database size
Timeliness of Data
Frequency of Updates
As seen in October and November of 2008, the
financial markets, consumer confidence and the
overall state of the economy can cause rapid
Most states have regulatory governance that
limits the age of data used in establishing total
loss valuations. This is because external market
trends can influence the prices being asked for
Continued next page
www.audatex.us
13
Industry Trends
C o n t i n u e d f ro m p re v i o u s p a g e
vehicles. In valuing total loss vehicles, the
fresher the data, the more accurately it reflects
current market conditions. So, the faster new
data gets into a data source, the better.
Database Size
The Autosource
total loss valuation
solution can help
you stay on top of
vehicle-value
fluctuations.
Database size also becomes increasingly
important in volatile markets. This is especially
true for rural markets and less common vehicles,
which are both cases where some data sources
may contain fewer comparative vehicles and
may not reflect local market conditions. If limited
vehicle records exist, this impacts the time
needed to attain a sufficient number of records
that reflect current market conditions and this
can also impact the amount of time spent on
tasks such as obtaining dealer quotes.
Staying on Top
Statistically-valid vehicle valuations that reflect
current market conditions can materially impact
loss costs, settlement expenses and customer
satisfaction. The size of a vehicle-valuation
database (especially for rural markets and less
common vehicles), the frequency and method of
vehicle updates, and the timeliness of data are
all important factors in a rapidly changing used-
14
vehicle market. In such conditions, outdated
vehicle information not only impacts vehicle
values, but it can ultimately result in higher
expenses incurred from the process of reaching
fair and accurate settlements with customers.
The Audatex Autosource® total loss valuation
solution helps users address these concerns by
providing:
• Frequent data updates: Each week, more than
3 million new and updated vehicle records are
added to the system.
• Electronic updates: 98 percent of the records
within the Autosource total loss valuation
solution are updated electronically.
• Timely data: On average, just two days pass
from the time vehicle data is first published to
its inclusion within Autosource.
• A vast amount of data: Each year, millions of
vehicle records are entered into the system,
ensuring broad coverage.
For more information on Autosource, visit the
Audatex Web site at
http://audatex.us/insurance_solutions/
total_loss_valuation.aspx. n
Audatex Directions
Vol 4
Shop View
Making the Journey to a Lean Shop
Part 1: Why Lean? Why Now?
By Dave Trissel and Krishna Masur
The number-one topic everywhere these days is,
of course, the economy, and naturally the top
concern of any business person is the future.
How robust will my business be? How will my
profits compare to previous years? Can I still
expect to grow my profits and my customer
base?
As we address the overall health of the
economy, we must also examine the state of the
body shop industry itself. More and more, it has
become apparent that insurers expect shops to
assist in managing loss costs and ensuring
customer retention during the collision repair
process. In fact, for some insurers, customer
satisfaction trumps costs and is the single most
important factor in handling a claim. And
customers? Well, they want their vehicles
repaired quickly and correctly—the first time.
In short, body shops are under immense
pressure to perform. The pinch is being felt by
even the most experienced shop owners,
especially those who operate small, family-
owned businesses and don’t have a lot of
economic wiggle room. According to
BodyShop Business:
• 75 percent of shop owners run a small,
independent, family-owned collision repair
shop.
• Shop owners are not novices. The average
number of years in the collision industry is
27.2 years.
• One-third of shop owners have annual gross
sales of up to $249,000, while 26 percent
reach over $1 million in sales.
• Most business comes from word of mouth,
meaning a lot hinges on customer satisfaction.
Do you see yourself reflected in these statistics?
With shop and insurance profits shrinking, shop
owners need to rethink how they run their
businesses. They have to find ways to repair
more cars, faster and without sacrificing quality.
They’ve got to identify ways to reduce waste, in
other words, ways to cut out anything that adds
costs but not value.
Continued next page
www.audatex.us
15
Shop View
C o n t i n u e d f ro m p re v i o u s p a g e
‘‘
It opened my eyes,
The way to reach these goals is to adopt and
apply Lean principles. Lean isn’t about telling
you how to run your business. Even the best-run
body shops can benefit from Lean principles,
which simply give you the basis from which to
make the most effective decisions for your
business.
We anticipate a
35 percent
increase in
efficiency and
throughput in all
areas, including
average length of
jobs, parts and
supplies
procurement and
’’
cycle times.
Vartan Ghazarian
Assistant Manager
Supreme Collision Centre
16
What is Lean?
To answer this question, one must first
understand what Lean is not. Lean is not cutting
for the sake of cutting, whether it is employees,
costs or anything else you can think of in your
shop. It’s not a management system. It’s not
something you can buy off the shelf and install
like software. It’s not something you learn about
and then check off the to-do list.
Lean is a philosophy. In essence, it’s an
approach to running a business that focuses
on value, waste elimination and increased
speed. As stated by John Sweigart,
co-developer of a lean auto-body-repair
workflow-management process and one of
principals at The Body Shop @, “Lean is a
journey, not a destination.”
The term ‘Lean’ was coined by Jim Womack,
author of The Machine That Changed the World
and Lean Thinking. It stemmed from his research
of the famous Toyota Production System, or
TPS. Toyota takes a long-term approach to
business, making decisions based on the
philosophy that they’ll be around for hundreds of
years. So, instead of thinking short term and
looking for a quick fix, Lean thinkers, like those
at Toyota, plan for the future, which naturally
affects how they treat their employees,
customers, community and suppliers.
When you think long term, your focus changes.
You tend to look at solutions that can evolve
over time to improve value, decrease waste and
increase speed. You look at how to utterly
transform your organization, not just how to
solve one specific problem. And, if you’re truly a
Lean organization, you look for others to work
with who have the same philosophy. In fact,
Lean works best when all entities in a supply
chain are Lean. Many top insurance companies
have adopted Lean principles and are looking to
their shop partners to adopt the same
philosophy because it has routinely led to cycletime reductions of 25 to 50 percent.
Coming in Part 2
Look out for part 2 of this series of articles on
Lean collision repair in the next edition of
Audatex Directions. Part 2 will examine the basic
principles and concepts associated with Lean. It
will focus on the idea that Lean is a long-term
commitment that has the potential to send you
and your employees on a journey that will
positively transform your business, making it
more profitable by positioning you to be a better
partner to your customers and suppliers.
The only way to have a truly Lean organization
is to train all the employees in your shop.
Audatex provides an online Lean Shop
certification course that doesn’t just cover the
basics of Lean, it applies the principles
specifically to collision repair. If you’d like more
information about Audatex Lean Six Sigma
for Collision Repair™, contact Audatex at
1-888-776-5372 extension 1964. n
Audatex Directions
Vol 4
A Look into Future Technology
Auto Thieves’ Newest
Opponent: License-Plate
Scanners
By Michael T. Anderson
According to the Insurance Information Institute,
about one-third of a typical comprehensive autoinsurance premium goes to paying for auto-theft
claims. It is estimated that a vehicle is stolen
every 26 seconds in the U.S., which equates to
approximately 1.2 million stolen vehicles a year.
Although data from the National Insurance Crime
Bureau has shown a downward trend in U.S.
vehicle theft over the past several years,
conservative estimates project that these losses
cost the industry approximately $8 billion a year.
Overall, the recovery rate for stolen vehicles
averages 62 percent, but rates can vary widely
by state and region. For example, border states
tend to have lower than average recovery rates,
especially among pick-up trucks and SUVs,
because a higher percentage of vehicles stolen
near the border are taken outside the U.S. for
disassembly and resale of parts.
In an attempt to capture criminals and recover
stolen vehicles, law enforcement agencies in
several U.S. states and Canada have instituted
new infrared tag-reading technology. These
automated-license-plate-recognition (ALPR)
systems can be mounted to patrol cars or fixed
devices such as toll booths, overhead highway
structures, or border signs and structures. At a
cost of approximately $25,000 per unit, these
devices have the ability to scan thousands of
license plates per hour. Within seconds, law
enforcement can identify stolen vehicles
traveling on interstates, local streets and even
parking lots. Such immediate notification has
helped U.S. and Canadian law enforcement
agencies detect and recover stolen vehicles
faster than ever.
ALPR systems can automatically recognize over
3,000 license plates per hour, even in poor
weather conditions or complete darkness.
Scanned plates are automatically compared to
stolen-vehicle databases. When a match is
detected, an alarm is triggered within seconds,
giving law enforcement notification to react.
www.audatex.us
As reported in The
Washington Post, in
Maryland’s Prince George’s
County, approximately 400
stolen vehicles were
detected using ALPR
technology in 2007. In
financial terms, this equates
to $3.7 million in recovered
assets. In neighboring
Charles County, police have
recovered 69 stolen vehicles
in 18 months. Other
jurisdictions that are prone
to auto theft report similar
results from their
implementation of ALPR
systems.
The use of ALPR systems
provides many benefits to
insurers as well. Law
enforcement agencies
report that the use of such
systems significantly
increases stolen-vehicle
recovery rates, decreases
time frames from theft to
recovery, and also acts as
a theft deterrent, as
evidenced by
disproportionate declines in
Source: The Arizona Republic
(Republic Research, Platescan)
overall theft rates in ALPRactive areas. For insurers,
improving recovery rates
and time from initial loss to recovery can mean the
References:
difference between vehicles being declared
Zapotosky, Matt. “Cruiser-Top
repairable versus total losses.
Also good news for insurers is the rapid rate at
which ALPR technology is being adopted. In the
greater Washington D.C. area, for example,
funding in excess of $4.5 million was approved to
install 200 additional readers in the Maryland,
Virginia and the District of Columbia. Several other
states are also adopting this technology. While
ALPR technology may be new, its implications for
the future are very promising. Over the next few
years, it could significantly impact insurers’ overall
theft and recovery percentages. n
Cameras Make Police Work a Snap,”
The Washington Post.
August 2, 2008.
Sheridan, Mary Beth. “License Plate
Readers To Be Used In D.C. Area,”
The Washington Post.
August 17, 2008.
17
Regulatory Highlights
Total Loss Changes on the Horizon
in the Northwest U.S.
By Diane Klund
Over the last several years, the Oregon
Insurance Division has proposed various
legislation and rule changes that would modify
how insurance companies calculate the value
of automobile total loss claims, and this year is
no different. Past legislative proposals, as well
as the most recent bill sponsored by the House
Committee on Consumer Protection
(House Bill 2370), suggested using independent
guide books to address consumer complaints
regarding total loss claims. To date, all of these
bills failed to pass.
Now, with a goal of providing more transparency
in the valuation process, the Division has
proposed a three-pronged legislative concept
based on the following principles:
In this regard, insurers pointed out that their
responsibility is to protect and indemnify their
policyholders. While some carriers did not take
issue with the concept of advance payment of
funds not in dispute, there was concern over
situations involving disputed liability and policy
limits.
During the meeting, the Division also provided
an example of a written explanation of the
valuation method. The example illustrated the
detail and style that would be appropriate for a
layperson in terms of explanations on what a
total loss is, how the insurance company
determines the value, and what options a
Continued next page
• Insurance companies would be required to
provide a motor vehicle owner with a written
explanation, in a form approved by the
Director of the Department of Consumer and
Business Services, describing the method
used to determine the value of the totaled
motor vehicle.
• When there is a disagreement over the value
of a totaled motor vehicle, insurance
companies would be required to pay the
motor vehicle owner the amount not in
dispute.
• The owner of a totaled motor vehicle could
recover reasonable appraisal costs from the
insurance company when the final appraisal
valuation is greater than the insurance
company’s final offer before appraisal costs
are incurred.
On Dec. 17, 2008, Acting Oregon Insurance
Administrator Teresa Miller presided over a
meeting that solicited feedback from industry
participants, including insurers, trade
associations and representatives from two
valuation providers.
Much of the meeting discussion centered on the
scope of the proposed legislation, which would
explicitly encompass third-party claims.
18
Audatex Directions
Vol 4
Regulatory Highlights
C o n t i n u e d f ro m p re v i o u s p a g e
consumer has when there is a dispute with the
insurer over the value. The meeting participants
started to dive into this document, but the
discussion was tabled pending the outcome of
the bill.
The final issue
discussed at
the meeting
was the
Division’s
concern that
consumers may
be at a disadvantage
in the dispute process because they may need
to pay out-of-pocket expenses for an appraisal.
This concern is the basis for the proposed
requirement that an insurer reimburse the
insured for reasonable appraisal costs if the final
appraisal value (umpire decision) is greater than
the insurer’s last offer before the final appraisal.
Other concerns regarding this matter included
the potential for a dramatic increase in appraisal
demands, as well as potential costs that may
arise if the policy brought forth were to be
amended.
valuation providers provided their input, the OIC
has made significant changes to the draft. The
most recent draft can be viewed on the office’s
Web site at
http://www.insurance.wa.gov/oicfiles/
rules/proposed/drafttext2.pdf.
Although the OIC has loosened its limitations on
the geographic area allowed for comparablevehicle and dealer-quotation searches, input at
the third stakeholder meeting on Nov. 18, 2008
continued to center around this topic.
Specifically at issue was the need
to differentiate between
requirements that are
appropriate when
actually replacing a
lost vehicle (in which case a very similar and
geographically-close comparable vehicle might
be warranted) versus the requirements
appropriate when determining an Actual Cash
Value settlement (in which case adjustments are
easily made for differences in comparability).
Other points highlighted by industry participants
were that the market should not be artificially
restricted geographically, and in fact, consumer
buying habits have expanded significantly with
the availability of online vehicle-shopping
Web sites. For now, the industry awaits the next
draft or the notice of a formal hearing on the
amendments. n
While not committing to any amendments,
Acting Administrator Miller thanked the industry
participants and said their feedback would be
taken into consideration. At the time of this
publication, no further meetings were planned
and the industry was awaiting news of a
committee hearing.
Elsewhere in the Northwest U.S., Washington
State’s Office of the Insurance Commissioner
(OIC) has been holding stakeholder meetings to
discuss proposed amendments to the Unfair
Claims Practices Act. After two lengthy meetings
in which insurers, trade associations and
www.audatex.us
19
Regulatory Highlights
C o n t i n u e d f ro m p re v i o u s p a g e
New York Kicks Off 2009 with a
New Flex-Rating Program
By Michael T. Anderson
Insurers operating in the state of New York
kicked off the new year by regaining the ability
to adjust annual private-passenger automobile
insurance rates under a new flex-rating program.
Insurers can now adjust rates within a 5 percent
flex-band, without prior approval from the state’s
Insurance Department. The new program, which
was signed into law in July 2008 as Insurance
Regulation Number 153, is designed to enhance
competition in the state’s automobile and homeowners insurance markets. In order to allow the
state’s Insurance Department time to formally
publish this new regulation, it was adopted on
an emergency basis beginning in late December
2008. This temporary regulation will expire after
90 days, or sooner if the Department formally
publishes the regulation before then. At the time
this newsletter was printed, the formal regulation
had not yet been published.
“For the last seven years the government has
employed a system of price fixing for auto
insurance,” said New York Insurance Association
President, Ellen Melchionni. “The reinstatement
of flex-rating will allow for a more nimble and
competitive market.”
New York State previously had a seven-percent
flex-band rating structure, which expired in
2001. Under that program, automobile insurance
premiums were lower and there was increased
competition among insurers operating in the
state. After the statute expired, some insurers
left the state and prices subsequently increased.
The new law is intended to ensure the availability
and affordability of property and casualty
insurance, as well as to stabilize the market
throughout the state.
5 percent cumulative rate change will be
measured. PCI maintains that the law is intended
to limit the number and cumulative effect of rate
increases applied during the 12-month period
following the law’s effective date, and that
“looking back” at increases approved prior to
the effective date is not the true intention of the
law.
Several other outstanding questions pertaining
to this new regulation include, but are not limited
to, those asking for clarification regarding the:
• definition of “non-business automobile
insurance policy”
• use of the term “premium”
• frequency of rate reduction file-and-use filings
in a twelve month period
• precise date range for measuring the fivepercent cumulative rate change
For further updates on this regulation, you can
contact the New York Insurance Department by
visiting their Web site at
http://www.ins.state.ny.us.
The emergency regulation can be found at:
http://www.ins.state.ny.us/r_emergy/
remgindx.htm. n
While several groups, including the Property
Casualty Insurers Association (PCI), have
supported the regulation, some questions still
remain. For example, in November 2008, PCI,
whose members represent 65.3 percent of all
personal-lines insurance business in New York,
asked the state’s Insurance Department to
clarify the precise effective date from which the
20
Audatex Directions
Vol 4
Industry Collaboration
Audatex and APU to Launch Integrated
Recycled-Parts Procurement Solution
By Charles Lukens and Brian Vannoni
In 2009, two trends will continue to evolve into
business standards—efficient supply-chain
solutions and ‘green’ corporate citizenship.
For the collision repair industry, maximizing
recycled-part use achieves both.
Smart part choice enabled by Web-based parts
sourcing and procurement represents the most
promising opportunity for insurers to impact
vehicle-repair costs. Under the traditional
paradigm of using new parts, replacement-part
costs represent an average of 42 percent of a
collision repair estimate. As such, carriers can
improve loss costs by switching to quality,
recycled OE part assemblies. At the same time,
recycled OE parts represent significant
environmental benefits because they save
materials and energy used in the manufacturing
process.
Despite these benefits, wide-spread adoption of
recycled-part use has been slow to increase
because, until recently, it’s been much easier to
talk about recycled OE parts than to actually find
and procure them. The challenge many insurers
and repairers faced was the ability to source
insurance-quality parts quickly and accurately.
In the past, the process of locating recycled
OE parts demanded that appraisers and
collision-repair estimators make multiple phone
calls to local recyclers or conduct multiple
searches, thereby adding unnecessary expense
to the process. As a result of these challenges,
over the past several years, costs attributed to
recycled parts have consistently represented
only about 14 percent of the total part dollars.
A major milestone in the move towards recycledparts utilization was achieved with the launch of
www.audatex.us
the Real Steel Download add-on module for
Audatex Estimating™. The solution enables an
estimate preparer to directly search for specific
parts within a vast database of insurance-quality
parts available from leading recyclers. While this
solution makes it easier than ever to locate
parts, phone calls are still needed to verify
availability and procure parts. To build upon the
strengths of this existing process, and to expand
the parts database, Audatex and APU have
announced plans to work together to deliver
real-time parts sourcing and procurement
functionality that is fully integrated within
Audatex Estimating. Powered by APU’s
PartsNetwork®, this integrated solution will
provide appraisers and repairers with real-time
access to part inventories representing millions
of alternative parts from suppliers nationwide, as
well as online procurement functionality.
A search engine will return data on part
availability, description, quality, pricing and
online procurement options—all within the
estimating system. The resulting solution will
reduce time previously needed for phone calls,
inquiries and supplements due to part availability
or condition.
...this integrated
solution will
provide appraisers
and repairers with
real-time access to
part inventories
representing
millions of
alternative parts
from suppliers
nationwide, as well
as online
procurement
functionality.
An equally exciting feature of the new solution
will be the availability of actionable reporting
metrics surrounding alternative-parts utilization.
The new solution will capture critical behaviorbased metrics, such as compliance with
alternative-parts rules, part-related supplement
activity, and the influence of appraiser decisions
on potential versus actual outcomes.
The new solution will make it easier than
ever to leverage used parts and make green
choices. n
21
Industry Collaboration
C o n t i n u e d f ro m p re v i o u s p a g e
‘‘
Repairers and Insurers Guide Inaugural Meeting of
Audatex Technical Advisory Council
I was very
impressed with the
participants,
their varied
backgrounds, and
the direction of the
discussion.
Everyone was
sincere in seeking
better estimating
products and
solutions, not
simply seeking an
advantage for their
’’
personal business.
Darrel Amberson
President of Lehman’s
Garage and two-term
NACE Chairman
Technical and database questions, user
experiences, and industry trends were just some
of the issues explored at the inaugural meeting
of the Audatex Technical Advisory Council,
which kicked off during NACE 2008. This newly
formed group of repairers and insurers will
communicate closely with Audatex to provide
end-user input for consideration in the
development of the Audatex database, as well
as specific product features and functionality.
“Audatex is very serious about listening to the
voice of our clients and responding to industry
needs. Earlier this year, we formed an interindustry Strategic Advisory Council to gather
input at the strategic level,” said Rick Tuuri,
Associate VP of Industry Relations for Audatex.
“The Technical Advisory Council is the next
logical step in this process because it provides a
regular venue for collecting input directly from
end users and exploring how Audatex can best
meet their needs through product development,
training, and customer communications.”
“We invited Council members with the goal of
having balanced participation from all
stakeholders and industry constituents,”
22
continued Tuuri. “Therefore, we invited both
insurers and repairers. Several national and
regional insurers have joined the Council, and
within the repairer segment, there is
representation from the CIC Database Task
Force, as well as the Database Enhancement
Gateway Joint Operating Committee, including
industry leaders from the AASP, ASA and
SCRS.”
The aim for inclusion seems to be succeeding.
After the first meeting, participant Darrel
Amberson, President of Lehman’s Garage and
two-term NACE Chairman, commented, “I was
very impressed with the participants, their varied
backgrounds, and the direction of the
discussion. Everyone was sincere in seeking
better estimating products and solutions, not
simply seeking an advantage for their personal
business.”
The Council plans to meet twice per year, with
regular communication between meetings. The
next meeting is scheduled for July to coordinate
with the I-CAR 30th Anniversary Meeting in
Washington, DC. n
Audatex Directions
Vol 4
Audatex News and Events
Audatex’s Parent Company Strengthens
Its Global Leadership through the
Acquisition of Two New Companies
Last year, Audatex’s parent company, Solera
Holdings, Inc. (NYSE: SLH), strengthened its
position as the leading global provider of
software and services to the automobile
insurance claims processing industry by
completing two key acquisitions.
In November 2008, Solera acquired the Brazilian
company Inpart Servicos Ltda. Inpart is a
leading provider of electronic-exchange
solutions used for the purchase and sale of
vehicle replacement parts. The company has an
extensive network of parts suppliers, as well as
an impressive customer list that includes some
of Brazil’s leading insurance companies and
collision repair facilities. Solera’s Founder,
Chairman and Chief Executive Officer, Tony
Aquila, commented, “We are very excited about
the accomplishments already achieved by the
Inpart team in the Brazilian market and we will
be exploring the opportunity to expand the
Inpart offering to other Latin American markets
that we already serve.”
In December 2008, Solera acquired HPI Ltd., the
leading provider of used-vehicle history and data
www.audatex.us
validation services in the United Kingdom. In
addition to confirming whether a vehicle has
outstanding car financing, is recorded as stolen,
or has previously been declared a total loss, HPI
solutions can also confirm details such as
specific make, model, color, door plan and
engine size. When speaking about this
acquisition, Aquila remarked, “The HPI suite of
products and services will enhance our delivery
of decision-support data and software
applications to our insurer, car manufacturer,
auto dealer, and finance company customers.
The acquisition will help us meet some of the
increased demand from our clients for access to
integrated historical information on specific
vehicles involved in potential transactions.”
Aquila also noted that Solera will explore the
possibility of expanding the HPI model, both
regionally and internationally.
With plans to consider delivering the solutions of
these newly acquired companies into additional
markets, Solera continues its quest to best serve
local customers by leveraging its global
knowledge. n
23
Audatex News and Events
C o n t i n u e d f ro m p re v i o u s p a g e
Revamped Online
Training Center Will Help
Users Unleash the
Power of Their
Audatex Solutions
In today’s demanding workplace, it’s more
important than ever to leverage all the tools at
your disposal. The newly revamped Audatex
Online Training Center will help ensure you’re
getting the most from your investment in
Audatex solutions.
Did You Know You Can:
• Attend award-winning
Audatex online
training for free
• Earn I-CAR points and
Continuing Education
Units by attending
select Audatex training
classes
Check It Out Today!
www.training.audatex.us
Last year, the Audatex Online Training Center
was accessed over 300,000 times by users
looking to gain an edge through obtaining
information on Audatex products, receiving ondemand training or attending live virtual classes.
Were you one of those users?
Later this month, new and enhanced features of
the Online Training Center will make it easier
than ever to put this resource to work for you.
Some of the features you’ll see include:
• Popular Document Tracking – See what
documents have helped other users by
checking out the most popular recently
accessed documents, which will be highlighted on
product pages.
• Enhanced Document Classifications – Enjoy
faster page loading and easier document navigation
with the help of new classification methods on the
product pages.
• Pop-Up Calendar, Multiple-Class Registration,
Faster Access – Save time by viewing upcoming
classes in a new pop-up calendar, registering for
multiple live online classes at the same time and
joining live online classes via a new, and faster,
access method.
• Master Proficiency Certificate (MPC) – Earn an
MPC by successfully completing a program
comprised of several different training components,
such as multiple classroom or virtual instructor-led
classes, or a mixture of classroom and virtual
classes, webinars, or computer-based training.
In addition to the MPC, you’ll also earn certificates
or accreditation typically associated with
completion of the individual course components.
• Enhanced Support for French- and SpanishSpeaking Clients – If your preferred language for
training is French or Spanish, learn in your
language-of-choice by accessing new languagespecific training pages. n
In Memoriam: Wadine Traylor-Freeman
A Colleague Who Left a Lasting Impression
On Nov. 24, 2008, long-time Audatex employee
Wadine Traylor-Freeman passed away after a
brave battle against cancer. She was just two
days shy of her 61st birthday.
Wadine Traylor-Freeman
Nov. 26, 1947 - Nov, 24, 2008
Throughout her career, Wadine made a lasting
impression on all her colleagues—not only
because of her admirable work ethic and
attention to detail, but more importantly, because
of her warm personality and genuine care for
others.
Wadine first joined Audatex (then ADP) in 1983,
at which time she managed the Dublin, California
hardware facility, a precursor to the technicallogistics asset-management company Integron.
Under Wadine’s leadership, an impressive
hardware-workflow and repair process was
created to support clients who leased equipment.
24
In fact, Wadine did such a great job that part of the
process she developed is still in place today, over 25
years later. In 1995, Wadine transferred to Audatex’s
Ann Arbor, Michigan location, where she led the
hardware team and acted as corporate liaison to
Integron, as well as to several of the industry’s top
laptop manufacturers.
The accolades Wadine received for her work were as
great as the impact she had on her colleagues, who
described her not only as a “mentor” and “rolemodel,” but also as a “wonderful person who was a
friend to many.”
For everyone who was lucky enough to have known
Wadine, the impression she left will surely never fade.
Wadine is survived by her son Mark, daughter Nikki
and six grandchildren. n
Audatex Directions
Vol 4
Audatex News and Events
C o n t i n u e d f ro m p re v i o u s p a g e
Catch Audatex at the next industry event or trade show.
Feb 23
Feb 24-26
“Leadership: The Business-IT Imperative”
2009 P&C Insurance Technology Conference
Totonto, Canada
Audatex Strategic Advisory Council - By Invitation Only
Miami, Florida
Mar 20-22
Northeast Tradeshow (AASP)
Secaucus, New Jersey
Mar 22-25
Property Loss Research Bureau (PLRB) / Liability Insurance
Research Bureau (LIRB) Claims Conference
Seattle, Washington
Apr 6-7
Insurance Data Management Association’s Annual Seminar,
“Insurance Business Intelligence– How Smart Are You?”
Philadelphia, Pennsylvania
Apr 18
Apr 19-23
Apr 22-23
Apr 26-28
May 15-16
July 29-30
www.audatex.us
Canadian Collision Industry Forum (CCIF) Meeting
Edmonton, Alberta
Risk and Insurance Management Society (RIMS)
2009 Annual Conference and Exhibition
Orlando, Florida
Collision Industry Conference (CIC) Meeting
Hartford, Connecticut
The Brian Sullivan 2009 Auto Insurance Report
National Conference
Naples, Florida
IT Tradeshow
Auto Recyclers Reunion and Review
Southington, Connecticut
CIC Meeting in conjunction with I-CAR Annual Meeting
Washington D.C.
25
15030 Avenue of Science, Suite 100, San Diego, CA 92128
Tel: (800) 237-4968 Fax: (858) 946-1073
www.audatex.us www.solerainc.com
© 2009 Audatex North America, Inc. All rights reserved.
All other registered trademarks are the property of their respective owners.
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Intelligence. Built In.
© Audatex North America, Inc. All Rights Reserved.
Proceed with Intelligence.
Customers look to you for more than an insurance policy. They want safety and peace of mind.
You ask no less of your information provider. You want a partner who will be there as your business needs
change. You demand stablility, vision, and intelligence. Audatex North America builds automotive claims
solutions that provide insurers with smart information. We develop software that runs on the world’s most
comprehensive vehicle database so you can delight policyholders. We’re constantly driving improvement.
From a new dispatch solution that can power your appraiser teams to higher performance to new
business analytics that deliver unparalleled insight, Audatex builds intelligence into every product.
Audatex associates stand ready to help get you through any obstacles ahead. For more than 40 years,
we’ve done business this way. And we have no plans to change. You can count on it.
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Intelligence. Built In.