Sides ‘too far apart’ to reach settlement on new rates for car hires

Crunch talks between insurers and representatives of the credit hire industry ended in stalemate this week, with the two sides unable to agree standard rates.

The rates, set by the ABI as a guideline, were first due to be updated in July, but an ABI spokesman said the two sides were still “too far apart” to reach an agreement.

The ABI, which has set up a working party to look at combating spiralling credit hire costs, will meet the representatives again, probably in the New Year. In the meantime, the existing agreement will apply.

Credit hire companies, which insurers use to provide replacement cars for their policyholders at an annual cost of £1bn, are a growing cost for the insurance industry. Analysts at Deloitte estimate inflation at between 10% and 15% per year – more than twice the overall motor claims inflation rate of 4.4%.

Justin Jacobs, director of motor at the ABI, said: “The cost of credit hire is becoming an increasing proportion of claims.

“The aim of the working party will be to reduce non value-added costs, which ultimately lead to increases in premium.”

John Hall, technical consultant at Royal & SunAlliance, said the rising costs associated with credit hire were the result of increased penetration and longer average durations of the service required.

But Tony Emms, motor claims director at Zurich, said that referral fees were the “root of the problem”, and called for government intervention and closer collaboration between insurers and credit hire agencies.

He said: “We know referral fees are happening. In order to gain control of the client, credit hire companies are paying referral fees, which they must recoup.

“There are two camps out there: those who work closely with insurers and those who do not. The larger credit hire companies are generally working more closely with insurers to eliminate frictional costs.”

Hall added that some insurers were more “forward thinking” than others in encouraging claimants to report their claims quickly.

The research commissioned by the working party is scheduled to conclude in January.