• Fri. Dec 1st, 2023

Car Auto Insurance

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How supply chain is leading to repair challenges for electric vehicles

The semiconductor chip shortage — a byproduct of the demand for advanced electric vehicle (EV) technology — has caused repair challenges for car rental services, says one expert at the Insurance Brokers Association of Ontario (IBAO) Convention in Toronto. 

However, insurers can still improve their customer’s experience amid these service challenges, which include COVID-related delays, says Mary Mahoney, vice president of the replacement and leisure division at Enterprise Holdings.

“During the lockdown, auto manufacturers had to shut down their plants and they were roughly closed for about 60 days. At the same time, they canceled their orders for chips, which are semiconductors,” says Mahoney.

Semiconductor chips are integral to EV production and enable digital technologies in vehicles. EVs reportedly need more than double the amount of chips than the average non-electric car.

“The demand for electronics just skyrocketed and it peaked the supplies of the chip manufacturers and almost emptied their warehouses across the world,” says Mahoney.

This may prove to be a concerning trend, since EV use is trending upwards, but are also becoming increasingly costly and complex to repair, she says.

“Because of that, and all of the industry challenges we’re all facing today, we are seeing an unprecedented increase in collision repair cycle time and related length of rental,” says Mahoney.

Length of rental in Canada has jumped to 16.5 days in 2022 Q3, up five days from 2021 Q3.

“We’re also dealing with a shortage of technicians right now,” says Mahoney. “There are limited capacities at shops because they don’t have enough technicians to repair the vehicles, and they don’t have the right technicians with the right skills.” 

Approximately 70,000 new repair technicians will be needed between 2022 and 2025, Enterprise reports.

It’s not all doom-and-gloom for auto insurers. Customers are overwhelmingly happy with their auto insurance providers, according to an Enterprise study based in the U.S. However, less than half of policyholders have loss-of-use coverage in the first place.

Of the 41% of auto insurance policyholders with loss-of-use coverage, a large majority (92%) reported satisfaction with their insurance provider when the customer used coverage, and another 91% reported a likelihood to remain with their current provider when fully covered.

“I’m also talking to many of our insurance partners in Canada, and they’re telling me the same thing,” says Mahoney, “Some of them are even saying that the product itself hasn’t been looked at in a very long time.”

There’s room for increased retention and customer service, suggests Mahoney.

“[This data] provides a massive opportunity for you to improve customer experience for your policyholders, as well as retention,” she says. “We have to work together to build [customer-driven], high-tech, high-touch solutions not only for the auto business, but the insurance business as well.”


Feature image by iStock.com/deepblue4you


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