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Rising Insurance Premiums Reduce the Number of Repair Jobs in the Replacement Body Collision Aftermarket

PALO ALTO, Calif.--March 2, 2005--Despite mounting reported collision rates and an assumed rise in the non-reported ones, the replacement body collision aftermarket is witnessing a decline in the number of total repair jobs. Factors that contribute to this trend are higher insurance premiums for vehicles with high claims and an escalation in the overall vehicle scrappage rate.

New analysis from Frost & Sullivan (http://www.transportation.frost.com), North American Replacement Body Collision Aftermarket, reveals that component revenues in 2004 totaled $1.71 billion. Revenues are estimated to reach $2.33 billion in 2011.

If you are interested in a virtual brochure, which provides manufacturers, end-users and other industry participants an overview of the latest analysis of the North American Replacement Body Collision Aftermarket, send an e-mail to Tolu Babalola - Corporate Communications at tolu.babalola@frost.com with the following information: your full name, company name, title, telephone number, fax number and e-mail. Upon receipt of the above information, an overview will be sent to you via e-mail.

Rising insurance premiums restrain many people involved in accidents from making claims. Either they choose not to repair the damage or the parties concerned make private arrangements to avoid notifying the insurance company. Moreover, scrappage rates are rising, further restraining collision victims from seeking repair jobs.

"The upside to the rising rates in the aftermarket is greater revenue," says Frost & Sullivan Senior Industry Analyst Mary-Beth Kellenberger. "Collision revenues from mechanical/electrical components, sheet metal, plastic, paint, and labor have experienced a general rise since 1993."

Another factor likely to drive revenue in the aftermarket is the constant rise new vehicle pricing. In 1997, luxury vehicles represented 4.1 percent of the vehicle population. In 2005, luxury vehicles expect to represent more than 10.7 percent of this population.

This shift is viewed as a mixed blessing for the repair industry. Historically, higher value vehicles warranted repair, but currently, higher-end vehicles include many more safety features such as crumple zones, laminated glass, and multiple air bags that, if activated, contribute to the vehicle's propensity to be scrapped.

Repair shops are wary about the participation of insurance companies in the overall process, since their involvement is as high as 90 percent. This is particularly detrimental to the interests of repair shops as the insurance companies usually pay lower rates for repair work through both lower-cost components and by labor rate concessions.

The insurance companies' position of power creates a highly competitive bidding situation for each repair job, and therefore, despite the rising component costs, the repair market is witnessing reduced operating margins.

"According to industry sources, shops participating in insurance company direct repair programs (DRPs) write approximately 42 percent more estimates and perform nearly 56 percent more jobs," notes Kellenberger. "Moreover, DRP shops have a "win" ratio of approximately 60 percent whereas non-DRP shops' job "win" ratio is approximately 50 percent."

DRPs also deal with the reduced availability of technicians. The collision repair industry is worse off due to the decreased value placed on collision repair skills. Skilled body collision technicians earn approximately 20 percent less than their mechanical counterparts. This differential is a major deterrent in attracting new talent to the industry.

"The high cost of equipment, declining availability of skilled workers, and the need to concentrate resources to maximize the economies of scale has resulted in the consolidation of collision repair facilities," observes Kellenberger.

North American Replacement Body Collision Aftermarket, a part of the North American Automotive Aftermarket Subscription, provides an overview of and outlook of the replacement body collision aftermarket. The study focuses on light vehicle applications including passenger cars and light trucks. The research covers the following segments: bumper/bumper fascia, doorframe, front fender, grill, quarter panel, and rear (trunk, hatch, lift gate, doors). Interviews of the analyst and executive summaries are available to the press.

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services and corporate management training to identify and develop opportunities. While serving clientele including Global 1000 companies, emerging companies, and the investment community, Frost & Sullivan's comprehensive industry coverage includes a unique global perspective that combines ongoing analysis of markets, technologies, econometrics, and demographics. For more information, visit http://www.frost.com.

North American Replacement Body Collision Aftermarket

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Keywords in this release: replacement body collision aftermarket, North America, sheet metal, crumple zones, laminated glass, multiple air bags, scrappage, direct repair programs, DRPs, research, information, market, trends, technology, service, forecast