Cazana: driving vehicle manufacturers towards a mobility services future

Find out how vehicle manufacturers can navigate various challenges and explore new ways to unlock revenues in a time of unprecedented change.

Vehicle manufacturers are currently facing significant challenges. Targeted from every side, they need to shift their focus to new ways to unlock revenues. This free white paper explores how vehicle manufacturers can survive and thrive in the future mobility space by providing both consumers and new B2B clients with optimised vehicle solutions.

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Cazana’s data-driven insights reveal the truth about vehicles, what sells, what doesn’t, what’s future-proof, who’s getting it right, and how. To find out more about how we can help you, please get in contact via sales@cazana.com.

Cazana’s Rustmap – rusty cars and where to find them

Over the last 6 months, there has been an array of bad weather conditions including one hurricane (Ophelia) and 21 storms in the UK including the more notable ones such as Storm Brian, Storm Georgina and Storm Aileen. All of this rainfall and harsh weather takes an unfortunate toll on our vehicles.

With this in mind, we have searched the extensive Cazana database and highlighted the counties in the UK that have the highest proportion of rusty cars, and identified which are the most rust prone. This was identified by looking at the volume of cars that have rust and corrosion warnings noted on MOT data.

It will come as no surprise that 5 of the rustiest counties for car owners in the UK are situated in Scotland where the weather conditions can often be harsher.

Top 10 rustiest counties in the UK for car owners

Here you have it, the worst offending counties for rusty cars.

Another unsurprising fact is that the top 3 counties with the highest proportion of rusty cars are close to the sea. While living close to the ocean may look stunning and have so many wonderful perks, unfortunately, it can be a tougher environment for cars. Certain environmental factors such as salt and fog near the coast can cause rust on a vehicle and accelerate vehicle corrosion.

  1. West Dunbartonshire, Scotland
  2. Fife, Scotland
  3. Northumberland, North East England
  4. Roxburghshire, Scotland
  5. Banffshire, Scotland
  6. Midlothian, Scotland
  7. Herefordshire, West Midlands
  8. Durham, Central England
  9. Lincolnshire, Central England
  10. Yorkshire, Northern England

Other counties that are high on the list include Lanarkshire, West Lothian, Angus and Flintshire. There is a clear pattern of either being close to the sea and somewhere where the weather conditions are tougher.

The counties with the lowest proportion of rusty cars

So in contrast to the list above, the counties with the lowest volume of rusty cars are mostly in the south and Wales.

  1. Antrim, Northern Ireland
  2. Middlesex, South East England
  3. Hampshire, South England
  4. Oxfordshire, South East England
  5. Surrey, South East England
  6. Denbighshire, North East Wales
  7. Kent, South East England
  8. Caernarfonshire, Wales

The top 10 rustiest cars in the UK

It’s surprising to see the nations favourite Ford Fiesta on here and not only that but it is top of the list. With so many on our roads and often older it is possible that they are also less well cared for. Land Rover and Jeep, however, are not as surprising to see on this list as they are often used heavily in off-road conditions where water and dirt are commonplace.

  1. Ford Fiesta
  2. Vauxhall Corsa
  3. Land Rover Range Rover Sport
  4. Ford StreetKa
  5. Toyota Rav-4
  6. Jeep Wrangler
  7. Volkswagen Polo Hatch
  8. MINI Hatchback
  9.  Ford Ka
  10. Fiat Grande Punto

What are the main causes of rust in vehicles?

rusty car in the sea

Rust is the reddish-brown/yellow colour that coats iron or steel when exposed to air and moisture. Our vehicles can be a big investment and financial commitment and to ensure we protect them we need to first understand what the main causes of rust are.

  • Location  

As fun as living near the coast is, as we mentioned above, it can take a toll on your car. Both the salt and moisture (water) in the air can cause vehicles to rust. Therefore it is no surprise that 6 out of the top 10 rustiest counties in this list are close to the sea.

  • Salt

Most road users in colder places will use salt to get rid of ice and snow from their vehicles and it is also used extensively to keep the roads clear. However, lengthy exposure to salt can be harmful to vehicles and make them more susceptible to corrosion as it gets caught in the nooks and crannies of the car.

  • Weather conditions

As we already mentioned water and moisture is a big cause of rust on and in cars. Rain, snow and fog are big factors in why our cars rust and corrode over time.

  • Neglect

Like anything in life if we ignore a bad situation it will eventually get worse. Not checking your car regularly and not keeping up with maintenance and more important cleanliness will cause minor instances of rust to flourish and turn into more serious issues.

Top 6 ways to prevent rust in vehicles

prevent rust in vehicles

  1. Regular maintenance. This may sound obvious but keep up with regular repairs as it can make all the difference when something is caught early.
  2. Inspect your car regularly and act on what you find covering body scratches and dings as quickly as possible
  3. Wash your car regularly. Make sure wheel arches and the underbody are regularly cleaned.
  4. Keep your car in a sheltered area. If you are lucky enough to have a garage or sheltered area to park make sure you use it to help protect your car from harsh weather conditions. If you don’t have a sheltered place to park then consider getting a car cover.
  5. Wax. Get your vehicle waxed twice a year (especially if you live near the seaside) and consider having a body protection treatment added.  
  6. Keep the inside of your car clean too. Don’t just wash the outside of the car, keep the interiors clean as well especially during Winter when there is more salt on the roads.

A Story of Residual Value Success

Last week’s speculation over whether Mitsubishi would be returning in a sales capacity to the European and UK markets raised some interesting questions. In the first instance, it was fascinating to see the relationship dynamics between Renault, Nissan and Mitsubishi and the strategy in play driven by the lead stakeholder Renault. The question was whether the French government, with their 15% stake in Renault, would find a way to insist on European and UK production of Mitsubishi vehicles in the struggling French Renault factories. Whilst it would now appear the French government and trade union pressure was not enough to make this happen, it was an interesting potential solution to boost production and work opportunity not to mention reactivating a route to market.

It also raised the question of used car residual value strength, and in particular those of OEMs that no longer sell cars in a given market. Under normal trading conditions used car residual values drop over the course of a year as the asset depreciates. The chart below demonstrates this by charting the performance month on month as a % of Original Cost New across the whole UK market: –

whole-market-data-retail-price-as-a-of-ocn

Data Powered by Cazana

It is clear from this chart that during 2020 the residual value performance of most cars saw an overall decline, and this is normal. This is not to say that retail pricing dropped, but it highlights that the relationship between price and cost new deteriorated, and this is an important industry standard performance measure of success. There are two other interesting points to highlight, the first being the obvious drop in residual value performance across the board in April as a result of the first Lockdown period, and the second is the growth in residual value terms of Electric vehicles and this will as we know continue to be the case in the short term as demand for key models outstrips supply.

Historically speaking in situations where an OEM fails or decides to leave a market, the residual value performance of their used car products takes a marked downturn. Memories of the departure of Rover from the market in 2005 and Saab in 2010 after a troubled ten-year ownership by GM resonate across the industry, and although some of these products now claim modern classic car status the journey to that point has been difficult, to say the least.

The question is, has Mitsubishi product suffered in the same way. There is no doubt that for some years there will be a nearly new product available in the used car market and whilst nobody would claim that Mitsubishi were market leaders in the industry, their product had a cachet and committed customer following. It will be interesting to see if that demand has supported residual values.

The chart below looks at residual value performance of the Mitsubishi Outlander at 2 years old and 20k miles over the last 2 years in comparison to the Honda CRV: –

mistubishi graph

This chart is of significant importance as it shows that the Mitsubishi Outlander has not seen a significant drop off in residual value performance. At this high level of analysis, these two petrol competitors have remained very close in pricing terms, before, during and after the July 2020 announcement of Mitsubishi withdrawing from the UK market.

In addition, on further investigation, other Mitsubishi models have performed in a similar way which supports the view that Mitsubishi has not followed the usual downward market withdrawal trend. There is a view that this position has been a result of the unique market conditions experienced following the emergence of COVID 19, although from a data perspective that is just not evident and whilst it surely had an impact on the desirability of the product, the ongoing support of the Mitsubishi dealers, parts suppliers and specialists appears to have kept residual values in line with market competitors.

With this data in mind, it would have been interesting to know whether restarting production in a more cost-effective production facility might have meant that Mitusbishi sales in the UK and Europe would have been worthwhile and perhaps more profitable. Either way, the brand has achieved something in the UK post availability that no mainstream manufacturer has done for some time.

 

Cazana Weekly Pricing Insight

As the country continues to be vaccinated at a tremendous rate, there is much greater pressure for the country to start to see a return to normality. The government’s announcement last week gave a welcome roadmap to the future and despite disappointment for the car retailers over the opening of the showrooms, there is still a clear way forward. However, this is still dependent on the public’s ability to follow the rules in place and make sure that even if they have had a vaccination there realise there is still the danger of spreading the virus. On a controversially positive note, it would seem that vehicle test drives have been given the go-ahead, although a number of retailers have decided they will not allow this on moral grounds.

The charts below qualify the market performance over the 7 days in comparison to the previous week with a full year trend line shown on the bottom in yellow: –

cazana-price-index

Data powered by Cazana

The significant growth in sales recorded in the previous period has remained consistent with just a small –2.7% drop in sales last week. This is positive news despite the slight decline, as consistency of performance in the market will be an essential part of recovery this year. From a Cazana Retail Price Index perspective, there has also been a slight dip of -1.5% and this represents an average of just £232 per car. Historically speaking the last week of February is one of the quietest months of any year but 2021 seems to have bucked the trend despite the COVID restrictions.

The chart below looks at retail price movements week on week by age profile: –

whole-market-data-WOW-retail-price-movement-asa-

Data powered by Cazana

The detail always brings headline figures into perspective, and the previous chart serves to demonstrate the importance of looking into the data more deeply. This week the older age profiles have seen a swing from the previous week with quite severe drops in average retail pricing in percentage terms. However, the largest move in pricing has been for the Pre Reg age profile which is interesting, specifically as February can be a large pre-registration month of cars before the arrival of the new plate. However, this is unexpected if this is the case as OEM production has been restricted in recent months, although this could be masking specific tactical activity the details of which may become apparent when the SMMT release their registration figures later in the week.

The chart below looks at the retail pricing activity in more detail by breaking it into movements by fuel type: –

Whole-market-data-wow-retail-price-movements-as-a-for-pre-reg-cars

Data powered by Cazana

The chart above further emphasises the need to interrogate market nuances in more detail. As identified some time ago there is significant volatility with Hybrid powered vehicles and this chart shows the average retail price in the Pre Reg sector has dropped by -20.4% with Petrol at -14%. Now this suggests that the profile of cars in the retail marketplace has changed and that there are more, lower priced non premium cars in the market. Further investigation reveals that the pricing activity in the Lower Medium car sector may be the root cause closely followed by the Large car sector.

In conclusion, the data shows that the last week of February has been a reasonably good week particularly considering the fact that it is the week before the new reg plate comes out. Generally speaking, sales volumes at the retailers were still at around 75% of where they would expect to be for a normal week. Used car activity in the first week of March will be intriguing and the industry is beginning to constructively plan towards reopening the showrooms on April 12th. To ensure commercial success, real-time data is essential and Cazana continues to bring Industry Standard pricing and insight to its customers and the automotive sector overall.

 

 

Motor Insurance premiums set to fall again

It has been widely reported that motor insurance premiums are set to fall further in the coming weeks as the market continues to re-adjust to the current volume of travel permissible under the most recent lockdown. COVID significantly affected how the population of the UK was able to travel in the early and latter parts of 2020 and the latest lockdown has compounded matters. Although the average mileage of vehicles on retail sale has started to drop, it has yet to truly reflect the far lower mileage covered by both business and private motorists in the last 12 months but is expected to do so in the next year.

In addition to the reduced mileage travelled, perhaps unsurprisingly the number of motor insurance claims has also dropped significantly. Some companies have reported claims levels down by almost 50%. As total annual claims settlement figures have been much lower than budgeted for, this has brought a welcome bonus to struggling insurers. However, it is also important to note that the Cazana Retail Price Index has climbed over the last year as demand for used cars has improved. The chart below summarises the current pricing position: –

cazana price index

Cazana base their data on retail prices in the public domain that are analysed in realtime to provide industry standard retail and wholesale pricing solutions.

This chart highlights that since January 2020 the Retail Price Index has climbed by 5.1% which, with this normalized data and an average price of £15,587, means that the overall price of a car has increased by £794. Motor Insurers have had to consider this when revising policy costs and claims settlement, tasks which are often more difficult to complete than expected.

Even more important has been the recognition that certain sectors of the retail market have been more active than others. Identifying what age and price bracket of the vehicle has become more prevalent has been another vital part of the insurance underwriting journey. As a direct result of COVID restrictions and the fear of travelling, there has been an increase in sales of older cheaper cars over the course of the last 12 months.

The chart below looks at sales by age profile during the last year: –

Data Powered by Cazana

It is clear from this chart that in comparison with January 2020 the volume of cars sold in the “Old Car” profile has increased. This has been evident since the end of the first lockdown period and validates the comment that more old cars are being bought as second and third cars or just commuting vehicles to avoid the danger of travelling on public transport.

In today’s modern auto retailing market, prices shift every day and a successful business must be able to offer new customers a swift and simple insurance policy quotation and implementation journey coupled with a highly competitive policy rate to win new business. The need for flexible and accurate taxonomy and most importantly vehicle pricing to address current and future nuances has never been so critical to keep quotation engines in line with market demand and retail pricing. Cazana are unique in providing realtime, retail driven, whole market Industry Standard data to satisfy insurance company underwriting demands.

 

Lockdown three – The road to recovery

After the prime minister’s parliamentary release yesterday, the positive news is that by June 21st the country should be back to an almost normal way of life although it is unlikely that society will ever return to living in the same way as before. This timeline is subject to our hitherto untrustworthy population following the rules and guidelines laid out.

Unfortunately, the news for the automotive industry is not as positive as had been hoped for. It would seem that the intense lobbying from the key industry bodies over the last few weeks has at this point proven unsuccessful. Retail car showrooms will not reopen until April 12th at the earliest, at which point the sector will hopefully see a release of some pent-up demand that has been growing since early December when the regional lockdowns began to come into place.

The chart below shows how retail sales were affected over the last 12 months: –

whole-market-retail-sales-by-fuel-type

The chart clearly shows the impact of the first lockdown in April 2020 that set the industry on a quest for online transactional capability and a task at which the majority of retailers have been very successful in resolving. At the same time, COVID 19 played into the hands of the retailers such as Cazoo, Cinch, Heycar and Carzam who were all already on the online retail journey. The whole new and used car sales journey has now changed, arguably for the better and a topic to be explored at a later date. The impact of the second and third lockdowns whilst evident in the chart, are much milder than before. It is also interesting to note that for the month of January 2021 used car sales levels are remarkably similar to January 2020 which is good news.

One of the other major concerns for the coming weeks is what will happen with the new car registration month of March. New car sales have been on a downward journey over the last 12 months and the beginning of 2021 is no different. However, January 2021 registrations were down by 39.5% and will also be down for February unless there is significant activity this week. As such, it is logical to expect that March will be poor too, although the consensus is that these registrations will come in greater volume after the retailer showrooms reopen in April. However, it does raise a question as to why used online car sales appear to be easier to transact than new cars at the moment. There are two reasons for this. Firstly, there is a significant possibility Lockdown is masking new car supply issues rather than reflecting actual demand and secondly that for some reason the customer does not trust buying a new car solely online. If true, the second point is fascinating as there is no logical reason behind why a customer should trust a new car less than a used car or is it because of the marketing message and profit opportunity.

In summary, whilst the news of reopening the retail showrooms in April 2021 is a disappointment it is not the disaster that it could have been or as bad for the industry as the first Lockdown was. Using realtime retail driven insight will help every automotive retailer and associated business to make the most of the new normal. It is unlikely that auto retailing will ever be the same again and the industry should be excited for the future and proud of the achievements over the last 12 months.

Cazana Weekly Pricing Insight

The previous week’s despondency seems to have lifted a little and economic activity across all sectors in the UK has improved. This may have been a bit of a feel-good factor kicking in as the volume of COVID vaccinations exceeded expectations slightly and the weather took a turn for the better. However, the automotive sector benefited from increased enquiry levels and better motivated customers reaching out to the retailers, and the result was a more positive week in sales terms. The last 7 days have also seen a significant increase in lobbying of the government to take a sensible approach to re-opening retail car showrooms ahead of some other retail outlets, the efficacy of which is as yet unknown.

The charts below qualify the market performance over the last week in comparison to the previous week with a full year trend line shown in yellow: –

Data powered by Cazana

After a drop-in sales volume last week, it is encouraging to note there was an increase of 36.3% in the last 7 days, which if it were a sustainable weekly increase would be ideal. Sales listings were also up by 11.3% which would suggest that retail consumer demand has driven buyers to the wholesalers in search of stock. In addition, the Average Price of a used car lifted by 17.1% over the previous week which may be due to the type of cars bought by the retailers to meet consumer demand. Overall, the normalised Cazana Used Car Price Index grew by 2.8%.

The chart below looks at retail price movements week on week by age profile: –

whole-market-data-live-retail-listings-by-age-profile

Data powered by Cazana

The chart shows that the older age profiles have seen an increase in the retail price of cars advertised for retail sale. Of note is the size of the increase of the Older Part Exchange and Old car profiles which on the face of it look pretty high and might suggest a big market swing, although it is important to quantify this by highlighting that the average price point is much lower. For example the Old Car average retail price last week was just £3,237. It is also interesting to note that the retail price of cars in the youngest 4 age profiles dropped slightly.

This kind of pricing activity can be a result of the volume of cars for sale in the retail market at any given time and the chart below looks at the volume of live retail adverts by age profile: –

whole-market-data-live-retail-listings-by-age-profile1

Data powered by Cazana

This chart shows that the age profile with the largest volume of live retail listings at the moment is the Part Exchange profile. The 4.4% uplift in the average retail price in the former chart is therefore of interest as this has happened whilst the volume of retail advert listings has also increased, and it could be argued that this is not a normal supply and demand pattern. However, the average retail price decreases in the previous charts for the newer age profiles are symptomatic of the increases in retail advert volume. As established almost a year ago it is therefore evident that lockdown is still enhancing demand for older cars.

In summary, the third week of February has seen a welcome pick to used car sales driven off the back of an increase in the number of better-quality enquiries. The end of lockdown draws ever closer and as highlighted by Cazana some weeks ago there will be a short period of higher sales as the pent-up demand is released. Using Cazana’s realtime market data, will help your business identify opportunities and threats to be able to maximise commercial performance as it happens in a fair and transparent way during the remaining weeks of lockdown.

Cazana Weekly Pricing Insight

The market has hit the mid-point of the month and February looks to be less promising than had been expected for both new and used car sales. General consumer confidence seems to be under pressure and the plethora of negative stories in the national press can’t be helping the situation. It should be no surprise to anybody in the nation that the economy shrank in 2020, or that retail sales nationwide were lower. The positivity of the current position seems to be overlooked and given the current lockdown and what happened in the last 12 months the country has shown remarkable resilience, as has the automotive sector and consumers should remember this.

The charts below qualify the market performance over the last week in comparison to the previous week with a full year trend line shown in yellow:-

Data powered by Cazana

Sales levels declined by -14.2% on the previous week and this is symptomatic of the general apathy of the retail consumer. Unfortunately, the resulting dip in sales leads available to convert towards commercial sales targets has been uncomfortable in the last 7 days for most retailers. There has also been a drop in the volume of new retail adverts suggesting wholesale stock is still proving difficult to find.

The chart below looks at retail price movements week on week by age profile: –

whole-market-data-WOW-RETAIL-PRICE-MOVEMENT

Data powered by Cazana

This chart is very interesting as it highlights some significant market pricing shifts and at the same time raises some questions on what is really happening in the used car market on a more granular level. In comparison to the previous week, there are 2 clear areas of change. Firstly the significant drop of -12.2% in the average Late and Low profile retail price, and the jump of 13.1% for the Old Car profile. Whilst the normalised Cazana Retail Price Index shows a minimal drop of -0.8% the detail is always of critical importance.

The chart below is a different lens on the market and looks at the weekly retail price movement as a % by fuel type: –

Whole-market-data-wow-retail-price-movement-fuel-type

Data powered by Cazana

A fascinating view that shows that despite the intricacies of market sector and individual models, all fuel types have shown a dip in average Retail Price on the previous week. There has been marked concern of late as to the Hybrid pricing position and this shows that in the last week there has been a large drop of -16.9%. This is not to say that the position may not significantly improve next week but it is clear that the balance of retail consumer demand on supply is having quite an effect. Talk of the Road to 2030 and the shift to BEVs and Hybrids is prevalent at the moment, and a variety of human decision-based forecasts are in being punted around the market. Retail fact-based insight is the only way to have a clear view and eliminate the subjectivity.

To conclude, the second week of February has not been the most encouraging of weeks either for the economy or the automotive sector. The cynical negativity that the nation is pre-disposed to, needs paradigm shift and maybe the improvement in the weather, the number of people vaccinated in the country and the governments plan to bring the country out of lockdown will improve matters. Using Cazana realtime market data, will help your business identify opportunities and maximise on commercial performance in a fair and transparent way.

The impact of COVID-19 on motor claims services

The impact of the coronavirus pandemic has been felt in every sector and the motor industry is no exception. Uncertainty, restrictions and social distancing measures have affected car dealers and production plants with delayed production and a fall in new car registrations. But it’s not just these areas that have felt the pandemic’s influence. Coronavirus has changed the way we used cars and it’s subsequently shaping the motor claims ecosystem.

The pandemic has altered our everyday behaviour and that includes our driving. Lockdown restrictions and government guidance to stay local have discouraged people from driving and resulted in fewer cars on the road. In March 2020, during the first lockdown, road travel dropped by 73% compared to pre-outbreak levels, according to Cabinet Office data – although levels will have increased over the course of the pandemic and as restrictions relaxed. This drop in road traffic is corroborated by Cazana’s analysis of MOT data (see chart below) which found that, on average, cars were logging 500 to 1,000 fewer miles per year in 2020, than they were in 2019. It’s a gap we should expect to grow even wider when MOT test numbers return to normal, following the six-month test freeze, and a full set of data can be obtained.

Fewer cars on the road have a number of knock-on effects but for insurance companies they mean fewer claims. Some car insurance firms registered a 50% drop in claims when the first lockdown was announced and similarly low levels at the start of 2021. Figures somewhat recovered towards the end of last year – the travel around Christmas presumably acting as a factor – but the pandemic continues to reduce claims numbers when lockdowns are imposed. As long as we’re in lockdown, we should expect motor claims to stay low.

On face value a reduction in claims would appear to be nothing but good news for the insurance industry as insurers see significant improvements in the COR (combined operating ratio) due to this temporary reduction in outgoings. The issue is that there is a wider eco system of claims services that rely on claims, and claims management, for their business to prosper. Companies that provide credit hire, 3rd party claims assessment and other ancillary services relating to claims management have seen a large portion of income come to an abrupt halt.

This claims drought dries up income streams for these types of businesses and places them under financial pressure. As long as claims stay low, this pressure will continue to be felt. This will eventually start to have a negative impact up stream to the insurers themselves as if these businesses are unable to survive then a large portion of insurers service proposition will be shut down. For example, if there are fewer businesses able to provide simple services such as replacement vehicles then that will not only impact customer satisfaction but also the additional revenue generated by the premiums from these additional services.

In addition to those businesses that are directly involved, in claims management and claims fulfilment, most insurers have a network of preferred suppliers/repairers that again rely on claims for large portions of their income. In exchange the insurers get preferential rates and agreed service levels.  If these businesses are unable to survive or have had to significantly reduce workforce numbers this will increase turnaround times on repairs, again affecting customer satisfaction and potentially creating additional costs of claims paid.

However, this drop in traffic and claims doesn’t mean the future is all bad for such companies. Once lockdown lifts, we should expect a spike in claims as traffic rushes back to the roads. Coronavirus has also increased the value of car ownership as safety concerns pull people away from public transport use and towards private travel: according to the RAC, more than half (57%) of drivers say having access to a car is more important that it was before the pandemic. And though the move to working from home may reduce business travel, it’s unlikely to wipe it out. At the end of last year, 64% of motorists still expected to drive to their workplace in the future; a drop of only 3% from surveys conducted before the pandemic.

A higher number of claims isn’t the only change we should expect once lockdown ends. It’s likely the motor claims services will experience an overcompensating increase in claims risk from new drivers (stalled over lockdown by the suspension of tests and lessons), out of practice drivers and vehicles that were poorly maintained during the pandemic.

The motor claims sector  has not been immune to the pandemic and has felt its effects from the beginning of the first lockdown. Yet whilst a dip in traffic levels and claims is concerning for some parts of the sector, this fall should only be temporary. The end of lockdown will likely be a busy time for claims departments as cars return to the roads and the public look to make the most of new freedoms and opportunities.

 

 

ADAS data and the impact on the Insurance industry

ADAS or Advanced driver assistance systems is the overarching terminology for a group of safety features designed to automate or enhance driver safety. These work by alerting the driver to potential dangers or actively providing automated avoidance. With more and more being done by vehicle manufacturers to improve driver safety, there are now over 4.5 million vehicles on the UK roads being produced with some type of ADAS. While this is likely to help reduce the total number of road traffic accidents, we are yet to fully understand the long-term impact on insurance pricing and claims costs.

It has been predicted that while claims costs will have an initial spike as a direct result of ADAS features, as these features become more commonplace, the associated costs to repair will decrease. Combine this with the potential of a reduction in accidents and it could start to make a positive dent (pun intended) in the overall costs as it will not only impact repairs and total loss claims but potentially the ever-increasing personal injury claims costs.

2020 saw the introduction of the IIR (UK insurance industry requirements) for the safe repair of ADAS equipped vehicles meaning the member insurers require repairers to meet vehicle manufacturing standards for safe ADAS repair. This should start to provide a level of consistency across the industry not only for the standard but also the costs of these repairs.

This makes having the correct data, about the specific fit of vehicles, even more relevant to insurers. As a feature by the same name can require very different standards of repair and therefore costs. For example, auto emergency breaking in a 2016 model could be significantly different (due to technological advancement) from a 2019 model.

Whichever way you look at the impact of ADAS on the insurance industry it is becoming very apparent that knowing what vehicles have ADAS either fitted as standard or as an optional extra will be an integral part of appropriate pricing and efficient claims cost management in the future.

Using Cazana data, our knowledge of the UK car parc and feedback from our insurance industry partners we can provide vehicle specific insights into what ADAS features are being adopted and which Brands, and models are leading the way, both from a safety perspective and their potential to impact claims inflation.

For example, we can tell that Nissan have really embraced lane departure warning (LDW) systems whereas Mercedes have taken greater strides into lane keeping assist (LKA) technology. Not only can we provide the knowledge of ADAS exposure, but we also normalise the manufacturer terminology to allow for direct comparisons across all makes and models.

These are essential insights for insurers as the impact of passive ADAS, such as a simple warning light associated with lane departure warning (LDW) vs the active ADAS of lane keep assist (where the vehicle actively takes control of the steering) to keep your car on track, will have a sizeable impact on how risks are assessed and claims costs are forecast.

This is just a taste of the of the data enrichment that we at Cazana have available and that is already being used across the insurance industry from point of quote through to claims management.

We will continue to share further insights over the coming weeks. If you want more information about how Cazana vehicle data can help to improve your insurance business COR (combined operating ratio), please do get in touch at sales@cazana.com

Cazana Weekly Pricing Insight

The month of January is a receding memory, and last week gave the first sign of how the February used car market will perform. Retailers have had to contend with poor weather and the promise of more disruption to come as temperatures plunge. In some respects, the adverse conditions have highlighted the advantages of the “mouse to house” sales journey, and online vehicle viewings have received a further boost to their popularity and cemented the need for them in every retailer’s online sale process.

The charts below qualify the market performance over the last week with a full year trendline shown in yellow: –

Cazana-weekly-price-watch-chart

Data powered by Cazana

Sales may have dipped a little further this week showing as being -9.3% lower than the previous week, although it is fair to say that February is not a wonderfully busy month in the best of times. New retail advert listings are reasonably consistent, although slightly down, and this might well be reflecting the slight difficulty some dealers are having finding replacement stock. Good quality cars are hard to find at the moment and buying cars for stock that need work, often results in delays in the preparation process.

The chart below looks at retail price movements week on week by age profile: –

week-on-week-whole-market-retail-price-change-by-age-profileData powered by Cazana

This chart above is very interesting and highlights the importance of using realtime data as part of a pricing and insight strategy. The market last week showed some significant changes even though the headline Cazana RPI showed a drop of -2.1% on the previous week. This headline hid a big change in the younger end of the market and also the Older Car age profile that showed an astonshing 16.5% drop in retail pricing. The volatility in the old car market is fascinating and as a direct comparison to the previous week, it is also noteworthy to see a far more balanced view of pricing for cars over 6.5 years in age overall.

Given the volatility of this age of vehicle the chart below looks at total sales by fuel type over the past 6 months: –

old-car-profile-sales-volume-in-the-last-6-months

Data powered by Cazana

This chart reflects upon the sales and fuel split in the last 6 months. At first sight one might think that these figures depict a normal market sales pattern although activity in September higher than normal. This is perhaps a reflection of the introduction of localised Lockdowns and the impending arrival of the colder wetter months influencing the retail consumer demand for Old Cars to keep people away from public transport and the risk of COVID. Of other note is the significant overall jump in sales of Old cars in January 2021. This seems particularly high although the current circumstances and lockdown will have influenced this quite heavily.

In summary, the used car market appears less healthy than the previous week based on the headline figures. These must be balanced against the time of year and a traditionally quiet month of trading is often the achilles heel for February. The data shows that retail pricing is still moving and the reality is that there are some very volatile market sectors in which profit and loss will have hurt some and benefitted others. Use Cazana realtime market data, as it is essential to help maximise the current level of sales opportunities in the UK used car market.

Cazana Weekly Pricing Insight

The last week of January proved to be resilient overall with a good level of consumer enquiries generating a respectable level of sales. Headline sales figures reflect a drop of 12.4% on the previous week although the week commencing January 18th had shown a jump of more than of 123.5% so this is perhaps not a surprise. Consumer confidence remains good in the automotive sector despite a slight downturn sector wide during January overall.

The charts below qualify the market conditions experienced over the last week with a full year trendline shown in yellow: –

Cazana Chart

Data powered by Cazana

A similar volume of new retail listings in comparison to the previous week shows that the market is stable which is good news. In addition, the Average Retail price of a used car in the market has increased by a nominal +0.4% with the Cazana Retail Price Index moving downwards by a minimal -0.1%. The detail is always key, and the chart below spotlights some interesting pricing shifts in Average Retail Pricing that suggest that the type of market activity for cars between 5 years and 10 years old may have changed: –

week-on-week-price-change-by-age

Data powered by Cazana

Last week’s Average Retail Price is similar to the previous week because there is consistency in the increase in Average Retail Price for the Pre Reg and Old Car profiles. The overall nominal decrease in Cazana Retail Price Index of -0.1% hides the positive that the majority of age profiles have seen an improvement in Average Retail Price. The drop for the Older Part Exchange and the Part Exchange profiles have offset a potentially larger increase in Average Retail Price. The chart below shows the influence on Average Retail Price based on the size of the retail market, split by age profile: –

market-share-by-age-group

Data powered by Cazana

As the chart shows, the largest retail advert market share belongs to the Part Exchange profile although the Old car profile follows closely behind. Despite the largest increase of 8.3% in Average Retail Price for Old Cars and five other age profiles, the drop of -9.8% and -4.6% for the Older Part Exchange and Part Exchange profiles has given just a partial view of what is happening in the market. This highlights the need for detailed data analysis to facilitate effective commercial strategising. Comparing the Average Retail Price performance against retail market share shown in the chart above is essential.

To conclude, the used car market in the last week has perhaps exceeded expectations specifically in the face of another drop-in consumer confidence and the increase in the population’s refusal to adhere to the government rules now referred to as Lockdown fatigue. Generating interest via social media and ensuring retail pricing is in line with realtime market conditions is essential to maximise on the current level of sales opportunity in the UK used car market.