By Bill McDonough, Editor, Body Language
A recent report published by Collision Week cited U.S. government figures on inflation that show the price of auto insurance and the cost of body repairs are both increasing faster than the overall rate of inflation over the past twelve months.
From January 2014 to January 2015, auto insurance costs rose at a rate more than 5 percent higher than inflation, while collision repair costs rose at a rate that was almost 2 percentage points higher than the overall inflation rate, as represented by the Consumer Price Index (CPI).
Looking further back, the Collision Week article notes that, “from the beginning of 2009 through January 2015, the consumer price for body work has increased an average 2.15 percent each year. This is less than one full point above the overall CPI which has increased at an average annual rate of 1.71 percent. Auto Insurance, according to the BLS, has increased at an average annual rate of 4.26 percent since the start of 2009.”
Why are body repair costs rising at a steeper rate than inflation? And why are insurance rates outpacing them?
One possible culprit? Restrictive U.S. patent laws.
Patent protection that is currently afforded to multiple OEM service parts is keeping replacement costs artificially high as there is no alternative for consumers. We’re all familiar with examples such as an OEM fender covered by a patent that commands $400 or more, while a fender available in an aftermarket version may be obtained for less than half that amount. Similar price disparities are rampant among parts whose patents are fiercely protected by automakers. It has been estimated that original equipment manufacturers control as much as 72% of the replacement parts market.1
Who pays the difference? Insurance companies and, eventually, consumers. A significant part of auto insurance premium increases can be attributed to the rise in repair costs when insurance companies are forced, either by restrictive state laws or patents, to pay for OEM parts.
The proof of the harm done by restrictive patents is in the numbers reported by the federal government. Consumers are paying more than necessary to repair their vehicles and for the insurance that protects them, thanks in large part to automakers’ efforts to keep healthy competition out of the parts market.
1 Automotive World, “US PARTS Bill Threatens Design Protection of OEM Parts,” July 2012.