Piecing It Together

It used to be that drivers did not think twice about repairing or replacing a damaged windshield. Once that piece of gravel flying up from a truck caused a chip or crack, consumers would call their company or broker and get it fixed. With deductibles as low as $100 during the 90s, claims were fast and frequent.

Things have changed. Today, many insurance companies in Ontario have set deductibles at $300, in line with regulations introduced under the former auto insurance legislation Bill-59. Some companies are now looking at raising deductibles even higher to $500 or more. When you consider that the average auto glass claim is less than $500, it is not hard to see that glass repair and replacement could be moving quickly into the retail (i.e., non-insurance) arena.

HARD MARKET

However, it is not just deductible levels that are changing in the insurance marketplace. The unprecedented hard market conditions of 2002-2004 put the insurance industry into the media and public spotlight. As a consequence, many consumers have shown a reluctance to file claims for fear of being hit with a premium increase. In 2004, the property and casualty insurance industry showed an unprecedented year-on-year decline in claims costs and a sharp drop in net claims incurred from the previous year.

Auto glass suppliers in Canada have witnessed a similarly distinct decline in reported claims. From 2003-2004, there was a 25%-30% decrease in claims frequency, in line with the reported drop in general auto physical damage claims. This decline has continued into 2005, with a 12% drop seen over the first quarter of this year.

One of the dangers of this trend is that vehicle windshields are still being damaged at the same pace. Over the past 20 years, the breakage rate for windshields held steady at 6%. That means 6% of the 19 million vehicles on the road in Canada have damaged windshields, equal to 1.1 million vehicles at any given time.

There is no doubt that everyday there are likely thousands of consumers driving vehicles that have chipped or damaged windshields. Driving with a chipped or cracked windshield may compromise a drivers safety, in terms of limited visibility or the possibility of structural damage to the windshield.

INTEGRAL SAFETY

Modern windshields are more than just windows. They are an integral part of a vehicle’s structure, supporting the roof in case of a roll-over, protecting occupants from being ejected during an accident and providing a platform to assist in air bag deployment.

Windshields are made of laminated safety glass. “Laminated” refers to the layer of PVB (polyvinyl butyral) sandwiched between two layers of glass during the manufacturing process. The glass and PVB becomes a single glass unit following the application of pressure and heat during manufacturing. In a crash, broken windshield glass adheres to the PVB layer rather than flying around the passenger compartment. The windshield must also be installed with quality proper urethane and proper cure times to ensure that it does not come out in a collision.

Those in the auto glass industry know that it is best to repair small chips as soon as possible, before it gets worse and costs more to fix. Repairing the windshield is a “win-win” situation, saving both the policyholder and insurer money. In most cases, insurers will waive the deductible to promote repairs and reduce the cost of the claim.

MULTI RELATIONSHIP

The drop in windshield glass claims may create some safety issues, but it has also led to economic erosion in the over-supplied auto glass marketplace. In some cases, glass firms have looked to expand their product lines to include glass for residential and commercial properties or other product lines (such as accessory products) to offset the drop in revenue. Due to tough market conditions, several independent firms have closed while others have reorganized and now provide more efficient and broader services.

In the bigger picture, insurers have taken a second look at their relationships with auto glass suppliers just as they have with other vendors. The more progressive suppliers have responded with a range of services focused on efficient claims management, consumer choice in repair or replacement, swift turnaround and guaranteed quality in terms of product and installation.

What does an insurance company want from a glass provider? One of the most immediate needs is responsive customer service in the form of fast turnaround. Customers today are “timestarved” in their personal and work lives, and they want their cars back as quickly as possible. Insurers and brokers/agents should be able to direct customers to simplified claims reporting services, such as 24/7 claims call centers. Work and time guarantees of one-day turnaround should be consistent across most auto glass repair or replacement.

The second thing insurers look for is guaranteed quality in terms of parts and installation. While auto glass windshields must meet strict safety standards, insurance companies and consumers must also be confident with installation techniques. Progressive auto glass suppliers place a high value on training, education and strict installation standards, including the use of proper urethane products.

Insurance companies respect the fact that consumers should have choice in where they want to get their windshields fixed. While many insurers have preferred supplier programs, they realize they can not force consumers to certain shops. Auto glass suppliers have to meet this need and provide a range of shops, and mobile services, across Canada. This gives the policyholder the ultimate choice of how and where the work should be done.

SEAMLESS APPROACH

In fact, auto glass claims can be time consuming and draining on claims resources. Many insurers have realized the value of third party administrators (TPAs) in outsourcing the claims handling process for high-volume, relatively low-value losses. TPAs can handle any auto, residential or commercial glass claim as a seamless extension of the insurance company. From an integrated call center, this type of service provides end-to-end claims settlement services.

There will always be auto glass claims in the Canadian marketplace. However, it is expected that these claims will likely become a less frequent part of the insurance loss landscape in the years ahead. With this decline, insurance companies will continue to demand greater efficiency and a streamlined process for handling windshield claims. The right vendors will be those that meet these needs – and ultimately those of the consumer – as effectively as possible.