Two of the country's biggest motor insurers have dealt a serious and embarrassing blow to the much vaunted ABI initiative on credit hire in its first week, Insurance Times has learned.

Both CGU and Norwich Union, the second and third biggest players in the market with a combined share of 25%, have confirmed that they will not be participating.

Both are playing a "wait and see" game to see how the initiative develops. The ABI proposal is designed to steer victims of no fault accidents to designated car hire firms rather than allow them to use credit hire firms which charge a more expensive tariff.

While member participation was always going to be voluntary it would have been better if everyone was on board, said ABI spokesman Vic Rance.

He said he was not aware of any other dissenters at this point. The scheme officially kicked off at the start of this month. "Clearly we would have preferred it if everyone was in but the project still goes ahead," he said. A Norwich Union spokeswoman said the company already had its own favourable arrangements in place. "The business need for us is less dominant than it is for other insurers which don't have existing arrangements in place providing hire cars and authorised repairers," she said. "We plan to revisit our decision with the ABI in six months."

Ironically the Norwich already has an arrangement with both Enterprise and National, the two car hire companies at the centre of the ABI's initiative.

A CGU spokesman said the company had given the initiative its broad support. Like Norwich it already has its own pre-existing arrangements in place. However its specialist motor subsidiary Sabre however would be a participant. "We'll be keeping a watching brief while gaining some experience of the initiative," he said.

Michael Symons, managing director of the country's biggest credit hire firm, Helphire said the non-participation raised questions over the value of the scheme. "If two of the biggest three motor insurers don't get involved it makes the whole thing look like a bit of a joke."

Norwich and CGU had a combined net written premium in 1998 of £1.65 billion.

Meanwhile Paul Asplin of Das Legal Expenses said that the decision was unfortunate especially given the huge public profile Norwich and CGU have. "They'll (the ABI) will be disappointed. It's a dent and undoubtedly a bit of a set back," he said.

Court ruling may have huge impact on credit hire
A recent circuit court decision could have a serious effect on the credit hire industry if taken as a precedent, according to a leading firm of solicitors.

The case, reported in Insurance Times last week, involved an application to adjourn an action over which of two parties would pay a bill of £13,400 in credit hire costs following an accident.

One of the parties in the case had sought the adjournment on the grounds that the House of Lords may allow an appeal of Dimond v Lovell. The judge refused.

The decision, on the grounds of inordinate delay, means that parties looking to recover credit hire costs may no longer be able to "shelter" behind a House of Lords appeal. Future similar applications could be refused en masse.

Dominic Kelly, of Rosa Mumford, said delaying cases pending a Dimond v Lovell decision could be seen as "Anti-Woolf".