New Research Points to Economic Challenges Impacting the North American Towing Industry
Bill Sinn | May 23, 2019
Agero, Inc., a market leader in software-enabled driver assistance services for automotive manufacturers and insurance providers in North America, today released an industry-first public framework and research paper assessing the significant economic and business challenges impacting the towing industry, and calling for industry-wide discussion and action. The Service Provider Cost Index leverages published government economic data to quantify and understand dramatic business cost escalation for the towing and road services industry, reflecting inflation from 3.28% per year between 2012 through 2015 to 7.36% starting in 2016. An accompanying research paper, developed in conjunction with the Towing and Recovery Association of America, Inc.® (TRAA), further details the cost framework, highlighting the specific issues facing towing operators.
Approximately 65 million Americans, or 1 in 3 drivers, will experience a breakdown each year. These stranded motorists turn to a variety of roadside programs delivered through automotive OEMs, insurers, credit card or wireless providers and motor clubs for assistance, all of which depend on towing and related service providers for support. Approximately 57% of consumers report that next to price, the roadside assistance experience is the most important factor they consider when renewing auto insurance policies. In addition, automotive manufacturers are increasingly using value-added services like roadside assistance to maintain driver satisfaction scores, increase differentiation and support peripheral revenue streams, such as repairs. Demand for roadside services continues to rise as both miles traveled and average vehicle age climb.
But rising costs across labor, fuel, commercial insurance and other expenses are pushing service providers to a breaking point, such that 40% of providers believe that without changes, many towing businesses will not survive the next five years. Compounding matters are significant personal risk and emerging labor competition from ridesharing and delivery companies.
“Service providers are the single most important variable in a positive roadside experience,” notes Jeff Blecher, Chief Strategy Officer at Agero. “This is a critical role impacting both consumer safety and satisfaction, yet these providers are experiencing increasing economic pressures. It’s incumbent upon the industry to both recognize and understand this new reality so we can better act to keep the market healthy – and keep consumers satisfied.”
Service providers are operating in a challenging environment of increasing demand, higher customer expectations, difficult hours and conditions, escalating costs and threats to retention and hiring. To better understand these issues, Agero conducted a quantitative analysis of service provider costs reflecting relevant data from the U.S. Bureau of Labor Statistics and developed an open and public framework to track fluctuations across more than a dozen factors. The model, supported by additional research in Agero’s co-developed paper with TRAA, identifies a 2016 inflection point where costs significantly accelerated compared to historical rates – and well outpaced both the general rate of inflation and any changes to per-incident compensation. Key findings include:
- Historically comparable to the Consumer Price Index, costs for roadside service providers began to accelerate over two times previous rates starting in 2016.
- Costs for three components: labor (+9.12%), fuel (+20.7%) and commercial insurance (+19%) – are all up substantially in recent years, and together these constitute approximately 66% of operator expenses.
- Labor alone constitutes 40% of total operator costs and has increased at more than double the average national rate from the U.S. Bureau of Labor Statistics, primarily due to difficult conditions and a rise in alternative employment.
- Commercial insurance rates, which account for nearly 10% of a service provider’s cost structure, have grown an average of 19% industrywide; nearly three in four have seen premiums rising an average of 28%.
- Consumer satisfaction is closely correlated with wait times for assistance of less than 60 minutes, and a just 3% drop in the number of drivers would add approximately 13 minutes to current wait times.
“For many industries, there is strategic value in providing roadside assistance, from increasing customer engagement and loyalty to bolstering additional sources of revenue. The current economic environment is creating pressure on the provider community that is detrimental to the value of the service,” said Blecher. “A fundamental shift in economics is necessary, but change cannot be enacted in a silo. Industry-wide discussion and collaboration is needed.”
“Experiencing economic challenges, as our members do, and understanding the underlying factors are two different things,” notes Elizabeth Martineau-Dupuis, Director of Education at TRAA. “We’re grateful for Agero’s work creating a rigorous and transparent model of the conditions we’re seeing in towing and recovery, and look forward to input and conversation across the industry on the best way forward.”
The Service Provider Cost Index, as well as the white paper developed with TRAA to put these costs in a larger industry context, are available for download and comment. Public contribution from industry members, researchers and others is welcomed.
- ITA Pro Magazine May/June 2019
- Spotlight on the 2019 IASA Conference
- ValueMomentum Selects Erie as Site of Regional Development Center
- Capgemini and Majesco Become Alliance Partners
- Electronic Chat with Dr. Dan Shoham
- Electronic Chat with Todd Greenbaum
- Martha Notaras: The “Outsider” with an Amazing Inside View
- ProSight Direct Offers “Effortless Insurance for Today’s Professional”
- Electronic Chat with Larissa Tosch
- Martha Notaras Will Join ITA LIVE 2019 as a Keynote Speaker
- Five Things to Consider When Evaluating Your Cyber Risk
- ITA Pro Magazine, January/February 2019
- Major Ransomware Attack Could Hit U.S. with $89B In Economic Damages
- ITA Announces 1st of Three Keynote Speakers at ITA LIVE 2019
- Electronic Chat with Jeroen Morrenhof
- Legacy Systems Are Dead. Really? Don't Count On It.
- Now Accepting Nominations for the 2019 ITA Bridge Awards
- It's time to register for ITA LIVE!
- Registration is Now Open for ITA LIVE 2019!
- What to Expect from a Digital Experience Platform Implementation
- ITA Pro Magazine September Edition is Now Available
- It's National IT Professionals Day
- Save the Date for ITA-LIVE 2019
- OneShield Software and UrbanStat Work Together to Improve Real-Time Analytics and Risk Decision-Making
- ITA LIVE 2019 - SAVE THE DATE!
- Insurance Technology Association Announces New Editor-in-Chief
- August 2018 Edition ITA Pro Magazine is Now Available
- Enterprise Architecture in an Agile World
- Top 10 Tips for Securing Your Mobile Devices and Sensitive Client Data
- Industry Insight: 4 Global Insurance Trends in Digital, Data, Content Services and Security
- Diving Deeper into Prioritizing Your Strategic Digital investments
- Why Content Rules
- How Mass Personalization Will Open the Small Business Benefits Market
- At Year End 2017, Will Your Organization Be Protected from Cyber Risks?
- Do Insurance Bots Dream of Mitigating Risk?
- Conditioned to Respond
- Managing & Mobilizing Insurance Data in a Connected World
- Race to the Finish Line
- New Tools, New Opportunities in Claims
- ITA LIVE: Reaching Insurance Industry Crossroads
- Advice to Insurance IT Leaders: Keep Your Eye on the Ball
- New Date, Venue for ITA LIVE 2017
- Guidewire Makes Major Push to Small and Midtier Market by Acquiring ISCS
- Insurance Disruption is Happening Right Now
- Insurity Adds Strategic Investment Partner, General Atlantic
- Beyond Transformation: The Convergence of Finance, Risk, and Actuarial Functions
- The Rapid Evolution of Consumer Protection Regulation
- Talent Hunt: Finding, Attracting, Retaining Top People
- Insurers Flexing Their Distribution Models
- Technology Driving Disruption in Insurance
- Fear of ‘Next Bubble’ Challenges Life, Annuity Carriers
- Technology Allows Commercial Lines Insurers to Stand Out
- Single Sign-on Viewed as Biggest Tech Challenge for Agencies
- ISCS Observes 20th Anniversary; Scurto Predicts Major Changes Ahead
- Policyholders and Their First Impressions
- Progressive Making Progress on the UBI Front
- High and Dry: Insurers Search for Disaster Recovery Plans
- Insurers Sign The (Un)Dotted Line
- Reflections of a Retired Insurance CIO
- Mobile Device Management Just One Answer to BYOD Issue
- Lessons from GEICO and Progressive on Winning the Critical Buying Stage
- You Are a Target for a Cyber Attack
- Web-based Systems are the Next Evolution in Claims Technology
- Gaining a “Wow” Experience from Web Users
- Time to Shift from Business/IT Alignment to Business/IT Alliance
- Healthcare Insurers Changing to Consumer Model
- Organization is the Key for Selecting Software Vendors
- Analysts Expound on the Needs of the Mid-tier Insurance Market
- Finding the Cure for Obamacare’s Website
- New Software Solutions Benefit Insurers on the Inside and Outside
- Products, Market Impede Investment in Systems for Life Insurers
- Combatting Cyber Threats: Predict, Prevent, Persist
- The Future of Telematics Heads Beyond Insurance
- The Shame in Cyber Security Lapses
- Building Policy Administration Systems for the Future
- Insurers Look Into The Eyes of Their Policyholders
- It’s a New Dawn for the ITA
INSURANCE IT NEWS
- Eight Critical Areas for Customer Experience Transformation
- ASNOA Enters New Enterprise Agreement with Agency Revolution
- Rewards, cashback and instant feedback. Sygic and Onlia have committed themselves to making Canada safer
- EMC Insurance Announces Commercial Agreement with Betterview
- LexisNexis Risk Solutions Selected by GM as Preferred Insurance Data Partner
- Shift Technology Joins Guidewire PartnerConnect Alliance Program
- New Report Highlights Critical Developments That Are Accelerating Transformation in the Insurance Industry
- Norima Consulting, Inc. Joins Quadient Partner Advantage Program
The Email Chat is a regular feature of the ITA Pro magazine and website. We send a series of questions to an insurance IT leader in search of thought-provoking responses on important issues facing the insurance industry.
ITA LIVE 2019
The tide is up! It's time to register for ITA LIVE 2019, our annual educational and networking conference! Our theme is "The InsurTech Revolution: Cutting Through the Hype." and we'll be bringing in a torrent of industry thought leaders, amazing insight and wonderful perspectives on the world of insurtech and its impact on the insurance landscape.
ITA LIVE 2019 will present real-life examples of true startup technologies that are helping insurers gain real advantage -- and a competitive edge -- in the marketplace. We’ll highlight the more successful InsurTech partnerships, while offering case studies that demonstrate exciting innovation and cutting-edge techniques impacting all aspects of the insurance ecosystem.
Ride the wave to LIVE 2019. Sign up today! We look forward to seeing you in May, 2019!
BLOGS AND COLUMNS
Customer experience is an essential component of the transformational journey... READ MORE
Insurance companies can serve customers better when they have access to accurate data and use it to send personalized, relevant messages that deliver... READ MORE
You have surely heard it said that small businesses are the growth engine for America. Today, the phrase has a special ring to it for benefits... READ MORE
With stagnant growth and lingering low interest rates, the life insurance industry faces a challenging future... READ MORE
Finding insurance carriers willing to write commercial lines risks has always been a challenge for producers... READ MORE
As Guidewire Software prepares for the start of Connections, its 11th annual user conference that begins on Nov. 2, Brian Desmond, chief marketing... READ MORE