Auto insurers face rising repair costs, EVs and technological complexity in 2025: report

Amid inflation and labor shortages, the growing impact of electric vehicles (EVs) and rising repair costs, insurers and repairers will have a bumpy road ahead in the coming year, according to a report by CCC Intelligent Solutions Inc . Crash Course Q3 2024 Report.

The quarterly report is based on information derived from 300 million claims transactions and millions of personal injury and personal injury protection (PIP) / medical payment (MedPay) claims processed by CCC customers using the cloud platform provider’s product.

According to the latest report, total cost of repairs (TCOR) increased 3.7% in the first half of 2024 compared to the same period in 2023, driven primarily by labor and parts costs.

Labor rates rose 4.9% year-on-year, putting further financial pressure on repair shops and insurers.

The increasing complexity of vehicles, especially with the increased adoption of electric vehicles, results in more parts and labor hours per repair, CCC said.

Electric vehicles now account for 2.4 percent of all repairable claims in the first half of 2024, up from 1.6 percent in the same period in 2023, the data shows.

EV repairs remain more expensive than non-EVs, with the average repair cost for an EV 46.9% higher than that of a non-EV.

Labor accounts for 43.3% of total repair costs for EVs three years or newer, compared to 36.5% for non-EVs.

Persistent inflation continues to drive up costs for the industry, particularly in casualty claims.

Third-party medical billing line severity increased 5.4 percent and third-party medical billing line severity increased 6.1 percent from the first half of 2023.

The report found that uninsured and underinsured motorist accident claims have increased significantly, along with insurance premiums for consumers.

CCC data revealed a 1.8% year-over-year increase in vehicles reported by carriers as total losses in 2024, driven primarily by continued erosion of used vehicle values ​​and a maturing vehicle pool of 73% from ratings for vehicles seven years or older, reflecting the aging nature of the US car fleet.

“2025 will present unique challenges and opportunities for the auto claims and repair industry,” said Kyle Krumlauf, director of industry analysis at CCC and co-author of Crash Course. “From rising repair costs and labor shortages to increasing vehicle complexity and supply chain disruptions, staying ahead of these trends is critical to the industry’s viability. Our Q3 report provides key insights and strategies that the industry can use to overcome these challenges and succeed in an increasingly competitive market.”

Previously published annually, Crash Course will be released quarterly in 2024 to provide more frequent updates on key trends and insights.

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Trends Carriers Auto InsurTech Tech