Car repairers suffering in cold snap (Jan 2001)

The recent cold snap during the Christmas period has started to overstretch the capacity of the UK's bodyshops leaving insurers struggling to place repair work with approved sites.

With the seasonal rise in winter accident claims due to rise over the coming months, experts are predicting a repair capacity shortfall of 13 per cent over this peak period.

Research by independent analysts MFBI, forecasts that peak winter repair capacity shortages will increase to 28 per cent by 2006.

The report highlights that on average, nearly two-thirds of total accident damage claims occur over the five month period between November and March each year, and even with bodyshops working overtime, there is insufficient repair capacity to meet peaks in demand during the winter months.

Insurers therefore suffer with extended repair lead times, reduced service levels for policyholders and higher operating costs for bodyshops.

MFBI suggests that many insurers do not fully understand the mechanics of bodyshop profitability and simply believe that if a bodyshop makes a profit on a single repair case, then the more cases the repairer does then the more profit the shop will make.

It stresses that what insurers and some bodyshops fail or refuse to realise is that bodyshops suffer from diminishing returns as repair throughput increases. This means that as volume throughput grows through a bodyshop, repair efficiency and profitability per repair declines until negative profitability is reached.

MFBI's investigations go as far as to suggest that some insurers may actually want bodyshops to achieve negative profitability per repair as this means that they are obtaining repairs virtually at cost.

The report also highlighted the issues of labour rates, and the lack of efficiency in supplies purchasing and productivity.

Many insurance companies are now focusing on reducing the margins that bodyshops obtain on parts, paint and materials to reduce average repair costs. That said, unless this is offset by an increase in labour charge-out rates, the bodyshop's profitability will be depleted even further.

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