6 Emerging Trends in Auto Physical Damage Claims: What P&C Insurers Need to Know in 2025

The auto insurance industry is changing due to advancements in technology, economic factors, and changes in consumer needs. This is particularly evident in auto physical damage (APD) claims, which are an important part of the Property & Casualty (P&C) sector.

As insurers respond to evolving risk factors, awareness of current APD claims trends is vital for managing loss ratios, operational processes, and customer service.

Below are the six emerging trends in Auto Physical Damage claims in 2025:

1. Rising Repair Costs Driven by Vehicle Complexity

Newer vehicles are equipped with advanced assistance systems and electronics that enhance safety but make repairs more complex and costly. Even minor accidents can result in expensive recalibrations or part replacements.

Trend Insights:

• According to recent industry reports, average repair costs rose over 20% from 2020 to 2024.
• Calibration of ADAS components can add hundreds or even thousands of dollars to claim payouts.

Implication:
Insurers must refine their claims estimating models and consider partnerships with certified repair shops that can handle high-tech vehicles cost-effectively. Proactive communication with policyholders about potential delays and repair complexities will also help manage expectations and improve customer satisfaction.

2. Parts and Labor Shortages Still a Factor

The pandemic-era supply chain disruptions have eased somewhat, but parts shortages and labor scarcity continue to affect claims cycles. Delays in acquiring OEM parts and a shortage of skilled technicians have extended repair times and increased loss of use costs.

Trend Insights:

• Average vehicle repair cycle time now exceeds 18 days for many carriers.
• Some carriers are turning to aftermarket or remanufactured parts as viable alternatives.
• There is a shortage of technicians who can complete complex electronic components.

Implication:
Insurers are re-evaluating their parts sourcing strategies and considering broader networks of repair facilities to mitigate delays. These adaptations help minimize downtime for policyholders and support more predictable claim outcomes.

3. Telematics and AI Are Improving Claims Triage

Telematics and AI-driven analytics are becoming standard tools in the claims process. With real-time crash detection, first notice of loss (FNOL) can now be automated, expediting triage and routing the claim to the most efficient resolution path.

Trend Insights:

• Insurers using AI triage report up to a 40% reduction in claim cycle time.
• Some companies are experimenting with automated total loss determinations within hours of an incident.

Implication:
P&C carriers investing in AI for FNOL and damage assessment are seeing faster settlements and higher customer satisfaction. This not only improves cycle times and customer satisfaction, but also provides a claim organization a place to begin their path to using AI more effectively.

4. Increase in Total Loss Frequency

Due to higher repair costs and vehicle values, more vehicles are being declared total losses. Additionally, used vehicle prices – though cooling slightly in 2025 – remain historically elevated, impacting the payout on total loss claims.

Trend Insights:

• Total loss rates have increased to nearly 22% of APD claims, up from 17% in 2020.
• Rising interest rates and price increases due to tariffs also discourage consumers from financing repairs, pushing toward total loss outcomes.

Implication:
Claims departments must revisit their total loss thresholds and refine salvage strategies to maximize recovery value. In addition, closer partnerships with salvage vendors and enhanced data analytics can help optimize outcomes and mitigate loss costs.

5. Consumer Expectations and Digital Claims Experience

Today’s policyholders expect a seamless, digital-first experience. From mobile FNOL to real-time repair tracking, digital engagement tools are no longer optional; they are a competitive differentiator.

Trend Insights:

• Policyholders using digital self-service tools report up to 25% higher satisfaction scores.
• Mobile photo estimating is currently used in over 60% of APD claims.

Implication:
To meet consumer expectations, carriers must continue to invest in omnichannel claims solutions and user-friendly digital interfaces. By leveraging advanced automation and AI-powered chatbots, customer support can be further streamlined, resulting in faster resolutions and enhancing the overall customer experience.

6. Climate-Related Catastrophes Affecting Claim Volumes

More frequent severe weather events, such as hailstorms, floods, and hurricanes, are driving up comprehensive auto claims. In 2024, several states saw record auto damage losses from weather disasters.

Implication:
Catastrophe modeling must now account for not only property but also vehicle damage. Proactive communication and scalable claims resources are essential during weather-driven surge events.

Conclusion

The APD claims environment is undergoing rapid change, and insurers that proactively adapt will be best positioned to control costs, streamline operations, and delight customers. From investing in AI and telematics to optimizing repair networks and embracing digital tools, the time to evolve is now.

P&C carriers should stay agile, monitor these trends closely, and be ready to pivot strategies as technology and consumer behavior continue to shape the future of auto claims.

About Auriemma Roundtables for Auto Claims

The Auriemma Auto Claims Roundtable leverages data insights and peer-driven discussions to help auto insurance carrier participants develop actionable solutions, including the adoption of advanced data analytics, streamlined claims processes, and enhanced customer service outcomes.

Additional Roundtables will be scheduled in Q4 2025 and throughout 2026.

If you would like to learn more about Auriemma Roundtables for P&C Claims or to inquire about membership, please reach out to Ron Kifer for more information.