Law firm DAC Beachcroft says it is ‘certain’ that Covid-19 will impact claims values in these arenas
Claims values for both credit hire and bent metal could escalate because of delays in repairing vehicles – this links not only to the availability of staff able to conduct repairs, but also the coronavirus-related disruption to parts supply chains.
Shortages or disruption within these supply chains could also lead to increased prices for parts, while delays in vehicle repairs may boost the demand for hire cars, again causing costs to rise.
Emma Fuller, head of credit hire at DAC Beachcroft, explained: “Any delays may well lead to increased hire periods being claimed.
“We may also see an increase in labour costs not just from those businesses that continue to operate but also when people return to work, particularly if workloads are such that overtime and unsocial hours working come into play.
“Increased labour costs could affect both the repair and the parts production industries.”
In terms of knock-on effects, Fuller said that the increase in claims values could correspondingly lead to a rise in the costs being claimed by claimants.
Furthermore, “even greater scrutiny than usual will be required both in relation to the need for a hire vehicle and the period of hire during the period when there are so many more people working from home and the need to travel generally is massively reduced,” she added.
Although Fuller estimates that more individuals working from home and a reduction in non-essential travel could slash the number of accidents – and related claims – she believes this could, however, be offset by the natural increase in own vehicle travel as people seek to avoid public transport for essential journeys.
“That the Covid-19 outbreak and the responses to it will impact on claims and their value is certain: the extent to which this will happen cannot at this time be predicted with any certainty,” Fuller said.
But what can insurers do to mitigate the potential climb of claims values in this arena?
Fuller recommended that insurers clearly communicate their expectations around third party repair handling to credit hire companies, emphasising that if a vehicle is roadworthy, then it should not be sent for repairs unless all of the required parts are on-site and the garage can confirm it has the staff to complete the work.
Temporary repairs should also be considered, although this is not a typical measure undertaken.
Fuller explained: “In these unprecedented times, temporary repairs should be undertaken if certain parts cannot be obtained.
“A claimant’s duty to mitigate should be extended to include actions we may not deem reasonable in normal times. Parties should be doing all they can to get vehicles back on the road and avoiding unnecessary or extended hire periods, even if they will have to be sent back to the repairer at a later date when parts are available or employees are back at work.”
Furthermore, insurers should be seeking to understand the pressures within their supply chains in order to know where to direct captured hire or repair claims, consider the use of green parts if new parts cannot be sourced, or whether writing off a vehicle is more economic if repair will be significantly delayed as well as to direct resources to first notification teams.
“If your supply chain is fully functioning, ensure that you are making all possible efforts to get the third party into your own network,” Fuller said. “With several manufacturers around the country already closed, hire periods could potentially run into periods lasting several months. Claim spend will be mitigated if your repair network can source parts or you are paying your hire suppliers rather than a credit hire rate.”
Internal engineers could also prove useful in sourcing parts that may not initially appear to be available, Fuller added.
She continued: “Keeping claims under even tighter review than normal will be key to ensuring that any ongoing claim or a claim of which you have just been notified of is regularly reviewed to understand any delays a third party may be facing in a repair or payment process.
“This will allow you to respond and intervene where you can and provide an opportunity to argue a failure to mitigate further down the line should a third party fail to take this into account unreasonably.
“The societal and business changes being seen will impact upon claims. It will be essential for those in the claims field, particularly those acting for defendants, to be alert to the issues that arise and to action them appropriately.”
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