The motor insurer's loss is credit hire company's gain

The failure of insurers and credit hire agencies to reach an agreement on tariffs for replacement vehicles will do little to curb sky-rocketing costs in the industry.

The fact that previous agreements over rates have also taken time to thrash out will be of scant consolation to insurers, who find themselves footing an annual bill in the region of a billion pounds.

Though it is hoped that the ABI’s recently commissioned working party will discover ways to deliver savings through improved efficiency and closer collaboration between the two sides, it would seem that the best way to end up paying less is to charge less in the first place.

"Credit hire companies are leeches," says a chief executive at a major insurer, whose company is experiencing credit hire claims inflation of 13%, slightly less than the industry-wide figure suggested by Deloitte.

He adds: "They are yet another mouth feeding at the insurer's trough."

Considering that the motor claims inflation rate is around a third of that, at just 4.4%, he may just have a point.

In September the largest Credit Hire agency, Helphire, reported pre-ftax profits of over £40m – fuelled by an increase in hire volumes of over a third.

The ABI General Terms of Agreement currently stipulates a maximum rate of £35 per day which, insurers say, equates to at least a third more than comparable supply chain agencies.

The shadowy presence of “referral fees” clouds the picture further. Moves have been made in other areas to tackle the problem. It will be interesting to see if that remit is extended to the credit hire domain.

Nonetheless, insurers could do more to help themselves by deploying their own resources more effectively, and putting a greater onus into encouraging claimants to report their claim quickly.

John Hall, a technical consultant at Royal & Sun Alliance agrees that insurers could be more proactive. “Longer claims reporting profile of some insurers is causing problems, which often result in the use of credit hire,” he says, suggesting that direct insurers are advantageously positioned in this respect.

“Every insurer has their own approach,” he adds. “[But] because they are notified sooner, the direct market is better placed to manage the claims process.”

For the majority of insurers, however, who do not utilize the direct channel, their best option remains to forge closer links with credit hire agencies – many of whom, understandably, are quite happy to remain as they are.

Consequently, unless the ABI’s research uncovers something unexpected, it could be another bad year for motor insurers.