Deals sealed with Co-operative and Esure this week, but Allianz calls arrangements ‘unnecessary and backward’

RSA is on the brink of signing more bilateral agreements with other insurers to settle outstanding motor recoveries after signing its first such deals with The Co-operative Insurance and Esure this week.

An RSA spokesman would not name the other insurers involved, but said: “We are about to sign, and it’s going to be a big one.”

Insurance Times understands that Aviva is open to drawing up a bilateral agreement. Groupama claims director Darren Wills said that his company was also open to talks with RSA on the issue.
The agreements come after the High Court cleared RSA of a legal spat over the way the insurer hiked repair costs for at-fault drivers’ cars.

The new agreements are designed to remove unnecessary cost from the vehicle repair process, limit the need to involve claims handlers, and speed up the payment process.

RSA chief executive Adrian Brown said: “Our recent court victory proved that RSA’s repair model is legal; however, there remain industry-wide issues that need to be addressed to reform the dysfunctional motor market.

“A comprehensive solution is essential. Along with being fully engaged with the government, the OFT and Competition Commission, we are working with others in the industry to address these issues.

“This agreement is the first in what I hope will be a series of agreements that will help to remove unnecessary costs, and benefit our customers by speeding up claims settlement.”

The Co-operative’s director of general insurance David Neave said: “We have long recognised that there are costs in the system that don’t benefit honest motorists.

“Our new bilateral agreement is a transparent, workable model, which we hope to see adopted by the wider market.”

But Allianz technical claims manager Tony Newman was critical of the new arrangements, and said Allianz did not want bilateral agreements with RSA.

He added: “Bilateral agreements have long existed in the market. At the heart of them is trust to pass on discounts and claim the actual cost of repair. They remove frictional cost and benefit customers by speeding up claims settlements.

“We fail to see how moving to a model that increases repair costs from a discounted wholesale rate to a full retail rate can benefit customers or go any way to addressing reform of the ‘dysfunction motor market’. In our view it is an unnecessary and backward development.”

“Unless the appeal courts or the OFT intervene, which Allianz will welcome, the only end game here will be manufactured claims inflation that the customer will ultimately pay for.”

Talking points …

● Are bilateral agreements between insurers the best way to keep repair costs low?
● How many insurers will want to sign this sort of agreement?
● What will be the outcome of any Competition Commission review into motor insurance, and how will that affect bilateral agreements?