Focus on Credit hire

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					     The Journal
     Credit hire


     Focus on:
                                                             credit hire has been blamed for           insurers would follow AXA’s lead; to
                                                             increasing costs for motor insurers       date this has not happened, but it is
                                                             and thus raising premiums for all         clear that many feel the sector needs

     Credit hire
                                                             policyholders. This has an impact         reform.
                                                             across the market – underwriters             “We can understand the
                                                             have to factor increases into rates;      frustration felt by AXA and respect
                                                             brokers have to explain rising            their decision to withdraw,” says Roy
     Welcome to the Journal’s latest interactive Hot Topic   prices to disgruntled clients and         Hebburn, divisional claims manager
     feature, intended to stimulate debate on a key issue    claims personnel have to be alert to      (technical) at Allianz. “We have
                                                             exaggerated costs.                        strongly considered taking such a
     and prompt you to pitch in with your thoughts in our
                                                                Meanwhile, the credit hire sector      route but feel that, for us, working
     online forum. The topic this time is credit hire, and
                                                             defends its right to seek business        hard within the GTA is the right thing
     the problems it can cause for insurers and brokers.
                                                             and provide its clients with a superior   to do. Transgressors are identifiable,
     On the page opposite you’ll find contributions
                                                             level of service on the basis of          and it is a better use of our resource
     from our experts, who are also ready to respond         legitimate claims. The launch in June     to focus on them whilst allowing the
     to your queries and comments once you’ve read           of the Credit Hire Organisation (CHO),    majority of credit-hire cases to follow
     the article. To participate, head to     with its brief to raise the profile of    the well
     journalhottopics, where you’ll find instructions on     the sector, has given the sector one      worn GTA path, which is comfortably
     how to join the debate                                  voice.                                    process-driven.”
     Kevin Pratt, editor, The Journal                           One sign of insurer discontent            But issues remain, with many
                                                             occurred last year when AXA ceased        cases going to Court as insurers
                                                             working within the Association of         seek to reduce the amounts claimed
                                                             British Insurers’ (ABI) general terms     by credit-hire firms. Allianz itself
                                                             of agreement (GTA), which sets out        has twice succeeded in challenging
                                                             agreed rates and charges. AXA says        the costs incurred by credit hire
                                                             it believes that credit-hire costs        companies in Court of Appeal
                                                             account for up to 10% of premium          judgments.
                                                             income, which is growing as the              In one high-profile case, Darren
                                                             credit hire companies increase            Bent, the Sunderland and England
                                                             market penetration, and that this is      footballer, was a third party
                                                             unfair to its customers.                  involved in an accident with an
                                                                Some thought other motor               Allianz policyholder. The footballer’s
                                                                                                                   August/September 2010
                                                                                                                               Credit hire

                                                                        Mercedes CLS Coupe was damaged           on average, more than the GTA costs
                                                                        and he was referred to credit-hire       (ie commercial rates) are recovered.

                                                                                                                                                            General insurance
                                                                        firm Accident Exchange and hired an      Darren Bent and Beechwood Audi do
                                                                        Aston Martin DB9 for 94 days.            not indicate CHOs charging excessive
                                                                           Allianz challenged the period of      rates.”
                                                                        hire, the rate claimed and the need          Insurers say the problem is that
                                                                        for the hire in the Court of Appeal,     the cost of dealing with credit hire
                                                                        with the case submitted back to          firms and accident management
                                                                        Cambridge County Court for retrial.      groups is ultimately passed on to
Martin Saunders                      Julia Coakley
                                                                           In another case, an Audi A6 2.7 TDi   policyholders. “It obviously increases
Motor claims manager                 Divisional director
Allianz UK                           Lark Insurance Broking Group       Quattro S Line saloon belonging to       costs to the end policyholder as it is
The cost of credit hire has          Given that policyholders           Beechwood Birmingham, a large Audi       another player in the supply chain,”
grabbed the headlines with           are potentially committing         dealership trading under the name of     says Ian Currie, UK technical claims
spiralling inflation that has been   themselves to, at worst,           Beechwood Audi, was damaged in an        director at RSA. “But the credit hire
oblivious to the recent economic     responsibility to settle huge      accident.                                service is here to stay so the market
climate. This simply cannot          vehicle hire costs and, at best,      The company referred itself to        and the credit-hire industry need to
continue, for those costs are        a protracted and inconvenient
                                                                        Accident Exchange and went on to         work together.”
passed onto the premium-paying       claims process (possibly
policyholder and so it continues.    including court action), it        claim £33,345.40 special damages             Currie says that disputes need to
Talk has long since been of          is surely time for the FSA’s       for the hire of a replacement prestige   be resolved quickly and easily and
“them and us” and “winners and       Treating Customers Fairly          Audi vehicle from them for a period      that the formation of the CHO should
losers”, but in the long term that   principles to be applied to the    of 120 days while their vehicle was      allow for better communications
intransigence counts for little      use of credit hire and to the      undergoing repair.                       between CHOs and insurers,
and the real battle is for both      contractual obligations agreed
                                                                           Allianz disputed the claim and        which should keep costs down for
sides to share responsibility.       by the policyholder?
    Insurers need to take firm           In my experience, clients
                                                                        was able to demonstrate that, at any     policyholders.
                                                                        one time, the claimant would have            Another contentious aspect of          21
decisive action and minimise         only believe they are signing to
true vehicle off-road time; credit   accept a ‘courtesy vehicle’ and    had at least 64 other vehicles in its    the credit-hire business is the use of
hire companies need to improve       are completely unaware of the      possession.                              referral fees whereby solicitors and
their own efficiencies. Both         implications to themselves and        Judge Sir Mark Potter ruled that      accident management companies will
sides need to be willing to talk     cost to insurer and ultimately     it was wrong in both logic and law       pay to have people referred their way.
and build relationships. Some        how this may impact market
                                                                        to adopt the spot hire rate as a fair        This is a practice that the Lord
significant advances have been       premiums.
made between some companies                                             approach to the measure of the           Justice Jackson’s report into UK legal
in the recent past and that needs                                       claimant’s damages for loss of use       reform has recommended is banned.
to continue.                                                            and the damage claim was reduced             “The real challenge will be around
    With credit hire at market                                          to £3000.                                getting Lord Justice Jackson’s
saturation point, the players                                              “We are absolutely delighted that     recommendations implemented. If
need to decide: continue to                                             the Court of Appeal had approached       his balanced set of proposals are
squeeze and fight for every
                                                                        the issues on a common sense             adopted, and particularly around
penny on every claim; or find a
way of working that improves                                            basis, which will have the effect of     referral fees, I am confident there will
efficiencies for each, improves                                         sending a strong message to CHOs         be a restoration of sanity and less
margins and leads to a step                                             that the gravy train cannot career on    adversity,” says Hebburn.
change in a downward direction                                          regardless. The clear guidelines laid        Graeme Trudgill, technical
that is of benefit to those who                                         out in Bent and Beechwood will be        and corporate affairs executive
pay premiums.
                                                                        ignored by CHOs                          at the British Insurance Brokers’
                                                                        at their peril,” says Hebburn.           Association (BIBA), says: “At BIBA

The credit hire sector                                                     However, Tony Baker, director
                                                                        general of the CHO, says: “The
                                                                                                                 our position is that it is a service to
                                                                                                                 customers. If people have a damaged
defends its right to seek                                               customer is entitled to a replacement
                                                                        car where their vehicle has been
                                                                                                                 vehicle, then lots of those people
                                                                                                                 are still going to need to get around
business and provide its                                                damaged through no fault of their        in a vehicle for their work or family

clients with a superior level                                           own. The cost of credit hire can
                                                                        only be the differential between
                                                                                                                 or whatever. That is fine and brokers
                                                                                                                 are happy to have that as part of the
of service on the basis of                                              what the insurer could have
                                                                        sourced the car for, and what they
                                                                                                                     Trudgill says that BIBA is setting
legitimate claims                                                       paid. Insurers, until the last few       up a sub-committee to look at the
                                                                        years, were reluctant to provide         credit hire issue.
                                                                        a service to motorists involved in           “We want to make a difference and
                                                                        an accident caused by one of their       it is better for everybody if we can
                                                                        policyholders.”                          improve it because, at the moment,
                                                                           He adds: “The great majority of       money is leaking out of the industry,”
                                                                        legal cases are won by CHOs and,         he concludes. J

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