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Copart: Running a Salvage Yard

Former General Manager at Copart

Why is this interview interesting?

  • How a digital loss adjusting process could drive higher total loss frequency ratios
  • Outlook on the complexity of vehicles and impact on salvage
  • What insurance customers really care about when choosing Copart vs IAA
  • Unit costs of running a salvage yard and bottlenecks in photographing vehicles
  • Drivers of the buyer fee and potential pressures on increasing fees over the next decade
  • Major determinants of the buyer’s ROI and how international scale drives a competitive advantage
  • Typical collisions and drivers of re-buildability for vehicles
  • Opportunities in the German market for Copart

Executive Bio

Kyle Roschli

Former General Manager at Copart

Kyle has nearly 10 years working at Copart in the US auto salvage market. He is the Former General Manager of 3 facilities in Baltimore that processed over 35,000 vehicles each year. Kyle has previously run catastrophe facilities in Alabama and Tampa and has deep operational experience running salvage yards across the US. He started his career on Copart’s Leadership Development Program where he was immersed in the culture and operational processes of the company. Kyle recently left Copart to start his own repair shop in Tennessee. Read more

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Interview Transcript

Kyle, can you share some background about your role and responsibilities at Copart?

I spent eight years with Copart in various operations roles. Most of my time was facility operations and I also served roles in catastrophe relief. Copart handles hurricanes and floods and I've had a couple of roles in that. My final role was in Maryland running Copart Baltimore.

How big were those facilities?

The largest facility was Copart Baltimore. It is a F size facility on Copart scale and it sold about 35,000 cars annually.

You were managing a couple of facilities in Baltimore which totaled 35,000 cars?

Correct. It was three facilities that made up the Baltimore market or area that we covered and those three collectively sold about 35,000 at auction, on an annual basis.

Can we walk through the full lifecycle of the salvage auction process? Starting where the driver crashes the car, makes a claim; what is the process for the insurance company after they've received that claim?

The company's first goal is to decide whether they're going to repair the vehicle or they're going to total out the vehicle. Every company has their own process for that. Some of them send adjusters in person. Some of them do it via images. Some of them have the customers take photos. There's a variety of processes and that's on a company by company basis. So they would move it to a facility and either to do an estimate or to do auction and a tow truck would move it to that facility. After it's deemed a total, either at my facility or at a tow facility, then it moves to an auction facility to move through the auction lifecycle process.

How does the adjusting process impact the total loss frequency ratio?

It’s a financial decision for them so they want to take the cheapest option, whether that's totaling the vehicle out or whether that's repairing the vehicle. They take a look at a car and say, how much will it cost us to fix this vehicle? Then they also take a look at what it will cost to pay the customer for their vehicle. Copart has evolved enough that they are able to give info to the insurers as well that says, we can sell this vehicle for this much so they can calculate that into the decision-making process.

Given the fact that the loss adjuster might not be visiting the vehicle and is not just taking and sending pictures, is there any impact that could have on the total loss ratio?

Yes. If they're doing it via photos, they have to make some assumptions. You can only photo a vehicle so well and Copart, at least, doesn't dismantle the vehicles for them so it's hard to see what's going on behind the damage via photos. Photos generally increase your total loss rate because you're assuming that everything you can't see is also damaged. Whereas when they visit them in person, they can dismantle it themselves, they can check into the engine compartment, check underneath into the suspension and get a full part by part breakdown. In general, it will be the more expensive vehicles they'll take a closer look at and see how they can break them down into individual parts for cost.

Do you think that's had a significant impact in the total loss ratio that we've seen increase from, I think, 13%, 14% up to nearly 20% today?

Yes, definitely. Total loss frequency is up based upon both digital adjusting as well as the complexity of vehicles. Now a vehicle has a lot more parts and technology in it than it used to. There's cameras, sensors, all types of stuff just in the front end of a vehicle where 10 years ago, 20 years ago, it was just metal and plastic up front so it was a much simpler process both from parts and from a repair standpoint.

Roughly what percentage of the adjusting is done digital versus in person, today?

I can really only speak anecdotally about that; I'm not entirely sure numbers wise. Some companies, some insurers do a lot of digital adjusting. Some still haven't done any of it so it really just varies and it’s more how those companies view the market totally and what they can do with or without field adjusters.

Are we talking 40%, 50% roughly, in your opinion for the industry?

I would say it's over 50% now. Some of the larger carriers have moved exclusively to digital adjusting and, in general, there's a certain percentage of cars that you can just look at and tell that they’re totals and so almost no company, at this point, is taking those photos and still sending an adjuster out. If the entire front end is removed from a vehicle there's just no point repairing it. Photos and digital adjusting is becoming more common. There's advertisements out now for some of the companies where you take photos at the accident scene and send them to your adjuster and there are certain ones you can see every single airbag is popped and the entire front end is gone; the adjuster process just goes out the window there.

How do you see the total loss frequency evolving over the next 10 years?

I would expect it to continue to increase. Safety features and technology features are becoming more and more common. Particularly in the United States, safety standards go up almost annually and from a customer standpoint, it's usually viewed as preferable to total the vehicle. A lot of customers really don't enjoy getting back what they consider a wrecked vehicle or a repaired vehicle and so there are certain companies in the insurance world that view totaling out a vehicle as a customer service move. So if it's close or the customer has expressed disinterest in getting the vehicle back, some of them will take it as a customer service move to go ahead and total the vehicle. As feedback with customers becomes more common, as well as digital adjusting and technology in the vehicles, I think you are going to continue to see it move upwards.

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Copart: Running a Salvage Yard

October 22, 2020

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