Protective Asset Protection recently shared a new set of data analysis showing how much average claims have increased annually for GAP payouts and vehicle service contract (VSC) claims dating back to 2014.
The provider of F&I programs, services and dealer owned warranty company programs found the average GAP claim payout has risen 19.5% between 2014 and 2018 for new vehicles, and a 95% increase over the same time for used vehicles. The company indicated new vehicles have averaged a 4.7% increase each year during that time and 18.5% per year increase for used vehicles.
Protective Asset Protection pointed toward several factors that have led to this increase in GAP claims payouts over the last few years, including
— An increase in claims due to more accidents with more cars on the road
— Insurance companies are more likely to total vehicles due to rising replacement parts complexity and corresponding costs, in conjunction with falling residual values (particularly for cars over SUVs/crossovers and trucks).
— More impactful weather events driving up claims payouts in recent years.
Protective Asset Protection went on to share that average VSC claims have risen 21% between 2014 and 2018 for new vehicles and a 3.7% increase for used vehicles. New vehicles have averaged a 5% increase each year during that time, with a smaller 0.9% increase for used vehicles.
“Service contract claims had among their largest payout increases in 2018 for both new and used vehicles, which illustrates that the costs associated with repairs and parts replacements continues to rise due to the complexity of today’s vehicles,” Protective Asset Protection senior vice president of operations and information technology Christopher Bernish said.
“GAP claims are impacted by many of the same factors but also tend to be influenced by weather patterns, which is understandable, given recent devastating hurricanes and other weather events,” Bernish continued.
While many analysts continue to predict softening new-vehicle sales, Protective Asset Protection emphasized used-vehicle demand is expected to continue to increase throughout the year. In fact, Edmunds analysts expect 2019 used-vehicle sales to reach 41 million, their highest level since the recession.
These trends will certainly impact F&I product claims activity going forward, according to Protective Asset Protection.
“Dealers continue to focus on F&I programs to combat margin compression and improve ownership satisfaction,” Protective Asset Protection said. “Ownership groups have also looked to have greater transparency with their F&I programs such as leveraging dealer-owned warranty company structures, whereby dealers own, market, sell and support their own branded F&I program.
“Besides greater profit potential on F&I sales, the great benefit here lies in the fact that dealers offer their own F&I offerings ranging from service contracts to ancillary products,” the provider went on to say.