ILC ARTICLE

Overview of ARC360 webinar 1st April

2nd April 2020

Hope remains despite crash in volumes

Volumes may have hit the floor in the last week, but repairers have been told that a better way of working may emerge from the devastation of the Covid-19 crisis.

Speaking during the third weekly webinar hosted by ARC360 in association with I Love Claims, Ryan Mandell, director, claims performance – auto physical damage solutions, Mitchell International, said, ‘Some shops feel optimistic for 2021 and beyond. There could be a real opportunity to thrive.’

It might be difficult to envisage in the midst of a crash in volumes of about 80%, but Ryan said that claims could surge next year as people spooked by the virus stayed in their cars, while efficiencies learned this summer could help businesses make the absolute most of an upturn in work.

Ryan was joined on the panel by Chris Weeks, executive director, NBRA; Michael Golding, network manager, LV=; and David Shepherd, regional managing director, Solera, all of whom agreed the industry landscape will be forever changed, but not necessarily for the worse.

Actions

In fact, there are already signs of businesses adopting new practices that could make lasting improvements to the sector. For example, in America insurers are now estimating based on images alone in 100% of cases. Although the benefits of this have been proven during trials, its impact has registered fully now the practice has been adopted wholesale.

Ryan said, ‘Many insurers have said they will stick with that strategy going forward because they’ve seen the efficiencies.’

Repairers are also working together to share capabilities around calibration to finish jobs, sub-letting aspects of the repair to a ‘rival’. Although counter-intuitive, it is creating work for one shop and enabling another to complete a job that was otherwise a blockage.

Closer to home, Michael said that LV= has added resource to its finance team to enable it to process invoices quicker and provide a cash lifeline to its network, which he acknowledges is ‘absolutely critical’.

Recovery

Meanwhile, David pointed out that, actually, it is during the recovery phase of an economic crisis that many businesses face their most challenging time as they resume trading but don’t have capital behind them.

He said, ‘Just as repairers have been impacted by a loss of volume, so have we. But we will do whatever it takes to help our customers and are working on a number of initiatives right now. We want to look after our customers and we want them to still be our customers after this.’

Chris emphasised how such initiatives, along with many other support measures emerging across the sector, are just some indications of an industry rallying together through a crisis which has only deepened in the last week.

Reality

Interim results of a repairer survey being carried out by TrendTracker, in partnership ARC360 and the NBRA, highlighted the stark reality of an industry in crisis right now. The survey is running until Friday (3 April), but as of Tuesday (31 March) nearly 49% of respondents suggested notifications were down by more than 80%, with a further 19% of businesses putting the decrease at between 71% to 80%.

Another 11% said notifications were down by between 61% and 70%.

Michael said, ‘We’re now beginning to enter a new phase which I think will last for a number of weeks. We need to prepare ourselves for this being the new normal for some time.’

David agreed, saying Audatex had seen claims volumes drop off dramatically this week by about 70%. He said government policy would determine if that was the real floor or a false one.

He said, ‘If the UK stays in partial lockdown we expect volumes to drop by 75%-80%. But in China their lockdown was total and we saw reductions of 100%. Overall, we’re expecting reductions for the year of about 25%.’

That was a figure Ryan recognised, suggesting Mitchell was planning for similar results – although he said America is lagging behind Europe, to date, in terms of coronavirus consequences on the industry.

He said, ‘I think there is still some runway for us to see lower volumes. In the US we’ve only seen about 30% reduction in volumes. We think it will cap out at about 80-85%.’

Buckling

These sorts of numbers were unimaginable just one month ago, and after little more than a week of partial lockdown bodyshops in the UK are already buckling. The TrendTracker survey found that 46% of respondents had already announced temporary closures, with a further 28% saying they expected to close shortly, possibly as soon as the weekend (4-5 April). This would leave just one in four repairers still trading come Saturday morning.

Chris said, ‘This is probably the biggest challenge any bodyshop has ever faced; they’re paying fixed costs with about 20% of income. It’s almost impossible to break even let alone make a profit.’

He said that although underwriters have implemented a number of measures to ease cashflow pressures, they did not go far enough. He said the support measures amounted to about £80 per job, when the breakeven number for bodyshops is nearer £400.

He said, ‘If I could ask one thing of insurers, I’d ask them to clear the decks in terms of what they owe bodyshops. Bodyshops are going to struggle to see this through. If this goes on for six months the impact on our industry will be devastating. Coming out of this there will be a similar number of claims again. If we want bodyshops to be there we really need to do something.’

Future

However, as gloomy as this appears at the moment, there is light at the end of the tunnel and some believe the potential is there to make it shine brighter than before once this crisis passes.

Michael believes this enforced cessation is an opportunity to make improvements to non-virus-related aspects of business, and adds that stronger relationships can be forged during their time.

Ryan agreed, saying the greater the collaboration right now the greater the likelihood of creating synergies that will help the whole industry be successful in the future. He said that while the coronavirus is ‘cataclysmic’ for the whole world and its effects would bleed into next year, there was a good reason to hope for a strong revival in 2021.

He said, ‘Some shops feel very optimistic for 2021 and beyond. They expect a massive increase in claims volume after this because people will opt for private vehicle travel instead of public transport because of a lingering fear. There could a real opportunity to thrive.’

That is already being noticed in China, and alongside greater volumes the industry can also carry forward lessons in efficiency learned during this period.

Technology

David said, ‘As an industry we don’t use technology well. Is ordering parts over the phone really the most efficient way? We need to think what we can do differently to get a typical 17-hour job through our shops in three days instead of 10 or 11. That means a connected supply chain asking, ‘how do we change for the better,’ and working together on the solutions.’

On a broader level, he predicted widescale changes across all businesses, with remote working becoming commonplace and in many cases replacing large corporate offices, resulting in huge savings.

He said, ‘This will be a seismic change and completely alter our work/life balance.’

How many will survive to enjoy this brave new world is the big question, but perhaps the number is higher than the doomsayers suggest. According to the TrendTracker/ARC360/NBRA survey, 83% of repairers said they were either very or cautiously confident of riding out the storm – even if the current lockdown persists for another two months.

ARC360, in association with I Love Claims, is supported by corporate partners: ACIS, BMS, Emacs, Entegral, Enterprise Rent-a-Car, Nationwide Vehicle Recovery Assistance, S&G Response, and CAPS; and partners: The Green Parts Specialist, Indasa, and the Innovation Group; as well as strategic partners: AutoRaise, NBRA, RepairTalks and Trend Tracker.