One way that the insurance industry could offer cheaper car insurance is by offering a no frills type of policy, basicall TPF&T with few bells and whistles. Higher excess than usual, say £1000, no breakdown and no courtesy car. For some drivers that could be doable, especially if they don’t need to commute to work.
Why does this matter? Simple really, credit hire costs are rising and so is the time for the average reapir. That time frame isn’t going to shrink as more hybrids and battery cars enter the claims chain. Research released by Keoghs reveals that the average cost of a credit hire invoice in 2024 is now five times higher than it was in 2014, rising from £1105 to £5249. The stats are sobering, so the question is how can insurers resolve this problem? Here’s the word;
The average daily hire rate for customers has increased from £69 10 years ago to £212 in 2024.
Based on data collated from Keoghs pre-litigated outsource department, which processes 40,000 claims per year on behalf of insurers consisting of both GTA and non-GTA, the current averages show steep inflation over a 10-year period.
Keoghs also reported what is thought to be the highest value individual credit hire claim the industry has ever seen, totaling £500,000. The claim was recently settled by Keoghs for a fraction of the claimed amount, after investigations showed the daily hire rate had been uplifted by an astounding £1165 per day by the credit hire organisation (CHO) involved.
As Gary Herring, Partner and Head of Credit Hire at Keoghs explains:
“With a milestone of the first £1/2m credit hire claim having been reached, we today highlight the scale of inflation that has been seen in the space over the last 10 years, significantly outpacing direct hire costs and CPI, which is in large part driven by a highly aggressive and unregulated non-GTA section of the market which has seen exponential growth in recent years.
“In addition, we highlight the risks to consumers posed by this minority of litigious CHOs, with evidence being seen of concerning practices which have a significantly detrimental impact on individuals and ultimately drive up the cost of insurance premiums for consumers generally.”
With approximately 60,000 credit hire customers caught up in litigation between CHOs and insurers every year, the Financial Ombudsman Service (FOS) also highlighted the risks the current market poses to consumers who unwittingly enter a credit hire agreement. In July 2023 the FOS reported a four-fold increase in complaints relating to credit hire, while also acknowledging that as credit hire agreements are exempt from the Consumer Credit Act they remain unregulated by the FCA and out of the FOS’ jurisdiction.
Keoghs also reports evidence of an increase in CHOs taking recovery action against their own customers. In one such example a customer contacted Keoghs after receiving a bill for £30,000 from one CHO, consisting of hire charges as well as solicitor’s costs. Not only was the customer told the vehicle was free, but after objecting to signing a witness statement on the basis it was factually inaccurate, the customer was told that unless the statement was signed, the claim against the third party would be jeopardised, leaving him liable for the costs. Faced with the choice between a bill for tens of thousands of pounds and committing contempt of court, the customer refused to sign.
“Whilst it can certainly be argued that credit hire has brought considerable benefits to consumers, we also regularly see evidence of significant detriment.” Gary Herring continues, “In particular, there are behaviours propagated by a small but growing minority of the industry which few could deny have the potential to – and do – cause vulnerable consumers significant harm. On that basis alone, the case for regulatory oversight of this section of the market has surely never been stronger.”
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