Can AA/Saga shake-up the credit hire market with new launch?

An insurer owning its own credit hire company. It’s an interesting business concept, something which insurers have looked at for some time, and now AA/Saga has taken the plunge.

On the face of it the move makes business sense. One of the biggest gripes of insurers is that they over-pay credit hire operators, last year alone they paid an estimated £490m to credit hire firms for supplying replacement vehicles to non-fault parties in motor claims.

AA/Saga want credit hire operators to cut them out of the expenses chain. If their policyholder is at fault, AA/Saga will aim to get the non-fault party to use their own credit hire company which is more cost-effective.

If their policyholder is the non-fault party, then they can arrange for their own cars to be used and bill the insurer. It’s just a question of how quickly they can compete with other interested parties hungry for referral fees.

It remains to be seen what business model AA/Saga will use, but it seems likely they will also want insurers to use them as a general credit hire company, especially if they offer competitive rates of business.

After all, surely an insurer should understand better than anyone else the financial drain credit hire causes?

On top of all of this, now is a great time to buy cars. Cars are at rock-bottom prices, so why not pick up some bargains to make up their credit hire fleet. There is also the option of leasing the cars.

So what are the drawbacks? Well, firstly they don’t have that much experience in a very competitive sector. Then they will have to market their business effectively.

But perhaps most importantly, they will need other insurers onside. Helphire has suffered considerably because of late payments from insurers in disputes of hire car fees. It’s a path AA/Saga would surely loathe to go down.

A lot will depend on how large and aggressive they want to be, but ultimately it will depend on proving there are a different proposition to the other credit hire companies.

See story: AA/Saga plan to launch in-house credit hire firm