Credit hire firm’s chief executive Steve Evans said legal action is likely if the calculations are not reviewed
The Competition Commission (CC) has made further errors in its calculations of the cost of credit hire, according to credit hire firm Accident Exchange’s chief executive Steve Evans.
Evans told Insurance Times that despite the correction for the VAT error that knocked £26m off the cost of credit hire and up to £45m off the cost of the separation of cost control and liability, the CC has still not calculated accurate figures.
“We’re slightly disappointed with what £1.3m buys you in the way of diligence and academic rigour,” he said. “We still don’t believe there is an adverse effect on competition and still don’t think the numbers are right.”
And in a letter to inquiry manager Sean Cornall, Evans called for further revisions to be made.
“Subtracting the £98m commission recognised by the group as going back into consumer benefits and which is the amount that was booked by insurers in 2012, then that leaves a net cost of credit hire over direct hire of £69m (not £95m),” he wrote. “Dividing that sum across 25.7 million policyholders (the number used in your logic) gets you to an annual cost of just £2.68 per policy.
“We even believe that sum is overstated based on your failure to review the basis on which direct hire rates are shown by you.”
In an interview with Insurance Times, Evans elaborated further on his disagreement with the basis of comparison.
“[The credit hire industry] has told them what our total charges have been, which includes things like additional drivers, non-standard drivers and other additional costs that a normal car rental company would charge,” he said. “They’ve then taken three insurance companies views of what direct hire charges are. Those rates exclude all of the things that we’ve included.”
And he called on the CC to review these calculations and come to a new figure based on a fair comparison and also look at the new costs post-implementation of remedies.
There is every likelihood that there will be an appeal to the Competition Appeal Tribunal
Steve Evans, Accident Exchange
“There are 17 items we’ve identified in total, which when you work through the formula they’ve set up to calculate the adverse effect on competition, the difference between credit hire and direct hire is pence,” he said. “They’ve got to identify what costs consumers will face in the new world, whatever that is. They completely ignored that.
“They’ve done no work at all to identify whether direct hire rates will stay low or whether in the absence of competition they’d rise. We’d like them to do the work to identify that their evidence is academically rigorous and on a strong foundation.”
He also warned that legal action would be likely if the current data being used was not revised.
“If we don’t [get access to the data we need], there is every likelihood that there will be an appeal to the Competition Appeal Tribunal before the final findings are ever released,” he said.
However, the ABI said that despite the reduction in the cost to the industry the cost of credit hire was still at an unacceptable level.
ABI policy manager, civil justice and data strategy Rob Cummings said: “The insurance industry has long highlighted the cost of credit hire as an additional and unnecessary cost to insurers, which ultimately leads to higher premiums for motorists.
“The revised findings of the commission clearly shows that the price difference is unacceptable between an insurer supplying a replacement vehicle (and they have control over the claim) and what they have to pay when a credit hire operator to supply the vehicle.”