The Covid-19 pandemic may be boosting income opportunities for credit hire firms – accumulatively, this could end up being a big financial hit for insurers

Credit hire is “still a big issue” that is “coming back with something of a vengeance at the moment”, according to Ian Davies, partner and head of motor at law firm Kennedys.

Davies suggests that credit hire organisations are using the ongoing Covid-19 pandemic to reap further income opportunities, for example around additional cleaning costs. He adds that “challenging cases” linked to the national lockdown are also beginning to be more prevalent.

He explained: “We are seeing, quite consistently now, cleaning invoices – so clean down a car at the end of a hire period, very specific Covid clean down.

”Whether that’s justified or not, advice is being given to clients, but [credit hire providers] were cleaning the car anyway. The fact that [they are] now cleaning the car with an antibacterial agent rather than a polishing agent still means [they are] cleaning the car, so a £50 charge to me seems a little bit rich.

“We’re also seeing an increase in the length of hire and there are some challenging cases that are starting to come through. Challenging in a sense that maybe the lay individual had no ability to advance it, that the garage that their car was [in] was maybe closed down, maybe furloughed and they’ve been in hire for five months while their car has sat on blocks in a garage somewhere being repaired.

”Is that an issue for the insurer? Is that a failure to mitigate? Lots of arguments coming up there and they will be working their way through into the courts relatively quickly.”

LiP plans ‘kicked into the long grass’

Davies is equally apprehensive about the impending whiplash reforms, the first phase of which has been pushed back to launch in April 2021.

This includes a new Litigation in Person (LiP) portal, whereby claimants can process their own personal injury claims online, up to a revised £5,000 limit, without the aid of a solicitor; this is an increase on the previous £1,000 small claims limit.

However, with issues around remediation and rules yet to be clarified, Davies thinks further delays to the LiP portal’s implementation are inevitable, especially with the onset of Christmas, and Brexit fast approaching as well as the continuing pandemic environment.

He said: “Six months or so away and there are still no rules. There’s no solution evidence around the challenge that they managed to discover [around] remediation.

”Most of us in practice say the remediation theory they have would never work and unsurprisingly they haven’t been able to find a solution. That needs to be addressed pretty quickly because if we take into account, hopefully not but it seems more likely, other forms of either local or national lockdown, then you’ve got Christmas, then you’ve got Brexit, everything else going on with Covid – we could be April 2021 and have another push back. Every delay, I fear that it gets closer to being kicked into the long grass.”

Davies describes the current situation regarding the portal as “a headache on claims directors’ and operational directors’ radar” because his clients are unable to finalise their operating models until the rules surrounding the portal have been formally confirmed.

To progress, Davies said “there needs to be a concerted effort at drafting and getting it right, otherwise we’ll end up at test litigation and there’ll be various challenges. It just seems to be an absence of activity at the moment. It seems to be very, very quiet and concerningly so.

”We’ll all be back in the same boat I fear – we’ll be three months from a go-live date without an insurer being able to set up a system. That’s my concern for our clients.”

Insurer liquidity

Furthermore, the court backlogs brought about by the coronavirus pandemic may affect insurers’ financial stability, Davies adds.

Citing Ministry of Justice (MoJ) figures for April to June, Davies says that although personal injury claims issued in this reporting period dropped by 42%, trial times have increased – this includes a 5.2 week increase for small claims and a three week increase for fast track and multitrack claims.

The average trial times for these types of claims are now 42 weeks and 62 weeks respectively, from point of issue to final hearing. Davies adds that 2021 listings are now very common.

In addition, the MoJ figures reveal that judgments have decreased by 78% overall, with 86% of judgments being defined as judgments in default – this indicates that insurers and law firms have struggled to get their systems to work and to respond to the courts adds Davies.

“The pressure on the court service is causing a distinct delay for our insurer clients in lifecycles. If what we’re seeing is a delay, even by a matter of weeks, it takes longer for those files to settle, it takes longer for that capital to be released and then has a knock-on effect for the liquidity of the insurers. It is important to them,” he continued.

In the future, Davies believes remote hearings may become a more permanent fixture as a way to reduce operating costs and start working through the court’s backlog.

In terms of mid loss multitrack claims, Davies also notes that there are a greater proportion of cases valued around £15,000 that are now progressing to sit around the £22,000 to £30,000 mark.

He said this may be because more experienced claimant lawyers have been deployed to lower value cases during the pandemic, or maybe claimants themselves have been looking to boost their claims value due to experiencing financial hardship because of coronavirus.

This could include looking to lengthen their claim. Davies adds that this trend was not seen prior to the pandemic.


On the topic of financial hardship, Davies thinks fraud is also going to be a concern, especially as the government’s furlough scheme and support measures come to an end next month.

He said: “Fraud is often driven by the state of the economy and I fear that those who will be seeking to boost their tax-free income will start to do so as maybe furlough schemes end, as maybe redundancies increase.

“There are claims that are being intimated for Covid – that’s going to be a very difficult one and ripe potentially for people to jump on that bandwagon.

“Every recession we face, we see an increase in fraudulent claims. It’s an evitable outcome of a recession.”