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The auto insurance industry has weathered its share of storms in recent years. Despite fewer claims in early 2024, carriers still face headwinds when it comes to vehicle complexity and its effect on severity and cycle time.

Following are the four most notable trends to watch in 2025 to help your organization successfully navigate the road ahead.

1. Total Loss Frequency is Rising

For years, new car depreciation began once a vehicle was driven off the lot. In fact, reported that automobiles lost half their purchase price within the first five years. Having a used vehicle increase in value over time was not supposed to happen. But it did.

More recently, this trend has begun to unwind, and vehicle values are now rightsizing. In the U.S., for example, reported that used automobile prices fell 7.25% this summer compared to last. In Canada, the pace of depreciation—a 14.4% year-over-year decrease—happened more rapidly according to .

In addition to changing vehicle economics, the automobiles on our roads are getting older. In 2002, the average age of the car parc was nearly nine and a half years. In 2024, it increased to a record in the U.S. While the average vehicle in Canada is , it has also trended older at a similar rate. As a result, the average age of a repairable, collision-damaged vehicle has risen as well (to 6.94 years in the U.S. and 6.01 years in Canada).

As vehicle values drop and the demand for new automobiles lessens, total loss frequency is increasing and is expected to continue its upward trajectory into 2025. Total loss market values, on the other hand, will likely return to where they would have been historically if we did not have a massive disruption during COVID. In fact, by May 2025, the average total loss market value is expected to be:

• 5% above historical average growth in the U. S.
• 13.2% above historical average growth in Canada

2. Claims Volumes Continue to Fall

The decrease in claims volumes was a hot topic in early 2024. The questions now are what is driving volumes down, will we see declines of 7% like we did in the U.S. earlier this year as compared to 2019 and the pre-COVID era, and how will that affect insurance underwriting decisions and repair facility revenues?

Although many want to attribute the reduction in claims to the growing availability of advanced driver assistance systems (ADAS), the more likely cause was a mild winter. With no snow and ice on the road, less precipitation and warmer temperatures, there are fewer accidents.

However, that is not the whole story. Insurance affordability is also prompting consumers to make different choices. For example, to keep auto insurance bills from increasing when premiums rise, policyholders may decide to change their coverage or raise their deductible. According to data from the , many have chosen the latter option.

Before 2021, the Motor Vehicle Consumer Price Index (CPI) was flat for years. That is no longer the case and, more recently, it has risen dramatically along with deductibles. Between January 2019 and July 2024, the average first-party deductible grew by 47% in the U.S. and 30% in Canada. Drivers with higher deductibles often make different decisions when it comes to filing collision-damage claims, which could result in fewer “small”, first-party claims in 2025.

3. Vehicle Complexity is Driving Up Severity

Despite fewer claims, average severity for repairable vehicles increased by over 5% in the first half of 2024 compared to the same time in 2023. Historically, that number has risen at a rate closer to 3% or 4%.

A primary reason for the growth in repairable severity is the increase in automobile complexity. Between 2019 and 2024, the average number of replacement parts listed on a damage appraisal jumped 15% and these parts now represent more than 51% of the overall repair cost. Since 2019, the average number of estimate operations has also risen by 20%. There are additional vehicle components—including more lightweight components—that have a higher replacement rate as well. Today it takes more to return a collision-damaged automobile to pre-loss condition—more parts, more operations and more labor.

Increasing vehicle complexity is also demonstrated by the different materials used in automobile construction. Between 2019 and 2022, more new body styles were introduced than in any other period. These styles included a growing reliance on the use of aluminum, composites, individual parts and technology. Some of that technology—like front cameras—are now standard and require recalibration regardless of the collision point of impact and severity. This can increase the cost of repair and create underwriting challenges for insurers.

As vehicles get older, they are becoming more expensive to repair. In 2024, damage appraisals for the 2019 Toyota RAV4 reveal an increase in the number of operations (+21%) and parts (+11%) compared to 2019 appraisals based on Mitchell data—suggesting that the industry’s understanding of repairing these vehicles has evolved. The average number of calibrations performed on a 2019 Toyota RAV4 in 2024 also increased 22%. This is not due to a change in accident type, but a better understanding of the vehicle’s repair requirements.

Other signs from 2019 to 2024 that point to severity trends continuing to increase next year in North America include the:

• 27% jump in the average repairable severity for new model-year vehicles
• 50% increase in average repairable severity for 5-year-old automobiles
• 4% increase in the frequency of 5-year-old vehicles

4. Electric and Hybrid Vehicles Present New Challenges

U.S. battery electric vehicle (BEV) sales and exceeded the one-million mark for the first time ever. Although North American sales were relatively flat in 2024, hybrid sales have grown approximately 70% year over year. Despite the possibility that changes in U.S. policy could impact future growth, these ICE alternatives in 2025.

So why is that significant? When it comes to claim costs, BEVs tend to be more expensive to repair than ICE vehicles due to their complexity. However, how much more depends on the automobile. Similarly, hybrids also share many of the same complexities, but their . Mild hybrids—which rely on an ICE as the primary propulsion source—are closely aligned with ICE vehicles in terms of average claims severity. On the other hand, plug-in hybrids—which lack an ICE—are nearly identical to BEVs. BEVs and hybrids also have higher rates of supplement submissions following the initial damage appraisal—underscoring their added complexity and the increased need to do a tear down of the vehicle to understand the full extent of the repair required.

Related to total loss outcomes, the tables have turned. With greater price parity between BEV and ICE vehicles in 2024, total loss frequencies are now nearly identical. Last quarter, BEVs totaled at a rate of 9.9% in the U.S. and 10.11% in Canada versus 9.98% and 11.74% respectively for newer ICE automobiles—which are comparable to BEVs in their complexity and cost to repair. If price parity between the two vehicle types persists in 2025, expect similar outcomes in total loss frequency in the coming year.

Shifting Gears and Adapting to Change

Based on these trends, auto insurers will need to be even more adept at assessing risk and managing costs in 2025—especially when vehicle advancements show no sign of slowing. However, by understanding the road ahead and enhancing coverage options, loss prevention programs, repair networks, claim workflows and technology solutions, carriers can improve policyholder satisfaction and exceed expectations while keeping pace with future automotive innovations.

Mandell is the director of claims performance for Mitchell, an Enlyte company. He works with insurance executives and material damage leaders to provide insights and consultative direction. He is also the host of the Mitchell Collision Podcast and author of the company’s Plugged-In: EV Collision Insights report.

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