Max Withington and Darren Mendel, Head of Credit Hire at Horwich Farrelly, the leading specialist insurance law firm, provides the following comment urging the insurance industry to consider the different ways that Covid-19 is likely to impact the credit hire industry:
“COVID-19 is presenting new challenges across the industry, which includes having to deal with credit hire claims where the hire has commenced just before or during the crisis. Unfortunately, these issues look set to remain post lockdown due to repair backlogs and a potential staggered return to ‘business as usual.’ Clearly treating customers fairly at this difficult time is paramount for a sector already in the spotlight, but it remains paramount that insurers don’t take their eyes off the ball when it comes to recognising how some CHOs may exploit the industry.
There are a number of practical steps that could be implemented to mitigate those claims.
“Whilst the burden is always on the claimant to prove the need for a replacement vehicle, recent times mean they will need to think very carefully about how they establish the need for a vehicle in the middle of the pandemic. Whilst the number of people on the roads has reduced dramatically, insurers still need to thoroughly investigate and consider each case. With more people working from home and others self-isolating there is an obvious question as to whether a claimant will need a replacement vehicle in the first place.
“As ever it is important to check the mileage completed during the hire period to establish the average daily/weekly use of the vehicle. A good starting point to investigate need is the mitigation statement as this should specify why the vehicle was needed during this period. At the moment, all but essential travel is allowed, so the question is was the travel essential and if so, why?
“The other challenge likely to face the sector as we come out of the pandemic is the potential increase in lengthy hire periods, caused by delays in vehicle supply and a backlog of work for garages. The risk is this could be identified as an opportunity by some CHO’s to try to maximise revenue by using Covid-19 to unnecessarily extend periods of hire. There needs to a greater emphasis across the industry on the monitoring so that periods of hire are kept to a minimum.
“Some CHO’s may also try to take advantage of the fact that Covid-19 is having a negative impact on the finances of households with the threat of redundancy, furloughing and financial uncertainty. The industry as a whole needs to ensure that the early disclosure of financial documentation is still provided in the usual way as well as checking to see if claimant’s availed themselves of any of the government financial support that has been proposed for the employed and self-employed.
“The positive news is that there are ways that insurers can intervene in order to reduce the impact of some CHO’s trying to exploit the current situation. The ability to offer the claimant a free replacement vehicle and repairs has always been an insurer’s strongest weapon to combat any hire claims and this crisis is a time to focus on and review how any intervention strategy can be adapted. A few straightforward considerations in light of the crisis include sending letters via email with a read receipt, including to the CHO with a covering letter explaining any additional steps the insurer is taking because of lockdown. Also, contacting the third party by telephone and following up by sending the letter via SMS or email.
“During these times where resource is under pressure and the industry adapts to a completely new way or working, it is crucial for insurers to consider the small steps that can be taken in order to remain on top of any CHO tactics. Horwich Farrelly continues to work closely with its Clients to provide support in an effort to avoid credit hire claims spiralling out of control.”