Annual AGM and Conference – SECOND DATE CHANGE
Please note the second change of date for the AGM and annual conference – an event with maximum relevance given the impending but delayed Provisional Findings now expected from the Competition Commission by “mid December” – which I am interpreting as being sometime in the week commencing 16 December. For this reason the conference date has moved for the second time from 17 December to 23 January. For sponsorship and exhibition opportunities please email email@example.com.
Linked in – The CHO User Group
We have recently set up “The CHO User Group” on Linked in for CHO Members only. To access this user group you first need to have a Linked in account and then, via Linked in, send a request to join the group. The user group is only available to current CHO Full and Associate Members. As such you will only be given access to the group if your Linked in email address matches that provided to the CHO – so we can control those that have access and ensure they are fully paid up members. If you wish to use an email address for Linked in that the CHO does not currently have you need to let firstname.lastname@example.org have those details. The user group is already proving to be a popular vehicle for members to interact and discuss relevant topics.
In relation to the Competition Commission’s (“CC”) ongoing work into the private motor insurance market, Martin Andrews, Director General of the Credit Hire Organisation (CHO) warns:
“Given the complexity of insurer behaviour in the market for the supply of motor insurance and related goods and services it was no surprise that the OFT made a referral to the CC. However, we continue to have serious concerns as to the potential impact it’s findings may have on the motoring consumer and their right to mobility after an accident that was not their fault.
“If the CC concludes that the at-fault driver’s insurer should have control over the not-at fault driver’s claim (which many insurers are petitioning for), motoring consumers could find themselves in a lose-lose situation. We could see premiums soar as insurers try to make up losses as they are forced to pay out for replacement vehicles; or insurers will find ways not to provide replacement vehicles and not-at fault drivers will be forced to “make do” and “catch the bus”. In each scenario the consumer will lose out, and hundreds of years of case law, establishing the consumer’s rights in the event of an accident, will be over-turned.
“We urge the CC to look for solutions in existing structures, most obviously the Association of British Insurers’ General Terms of Agreement. This is an effective mechanism, supported by both credit hire companies and insurers, whereby the costs of a replacement vehicle are minimised and the interests and legal rights of the UK consumer are protected.
“To ensure that these consumer rights remain at the heart of this debate, it is vital that credit hire companies and insurers continue to work with one another and with the CC. The CHO looks forward to further constructive engagement with interested parties over the next year.”
Martin Andrews has previously also commented as follows:
“The original decision of the OFT to investigate the private motor insurance market came after claims that motor insurance premiums had risen by almost 40 per cent to compensate for the increased costs of personal injury claims (whiplash) and other costs including those of credit hire. The Transport Select Committee subsequently identified that these claims were unfounded and the rise in premiums was in fact closer to 12 per cent and was caused by the increase in whiplash claims more than any other factor.
The CHO also notes a survey undertaken by MoneySupermarket.com released on 25 September that average motor premiums have fallen by over 10% in the twelve months to June 2012 and which also concludes that it is fraud and whiplash claims that adds £50 to an average motor premium
The ABI General Terms of Agreement – The GTA
The CHO maintains that the GTA is the existing “solution” to the wrongly called “dysfunctionality” within the supply of motor insurance in the UK and the provision of replacement vehicles to UK consumers. The GTA imposes considerable administration and claim monitoring burdens on credit hire companies who also offer insurers material discounts to the commercial day rates of the vehicles placed on hire. These discounted prices rise by 12.5% and then 20% if the insurer does not pay the hire charges within 30 or 60 days respectively. The insurer’s own behaviour can therefore determine the cost of the service provided. A recent audit of CHO GTA members concluded that credit hire compliance with the GTA was extremely high. The CHO believes that the Competition Commission should identify the GTA as the mechanism whereby costs are minimised and the interests and legal rights of the UK consumer are protected. The provisional findings from the OFT concluded that the costs of any market dysfunctionality in the UK private motor insurance market place were £225 million, representing less than 2 per cent of the insurers’ total annual spend of approximately £13 billion. Quite clearly then the costs of any market dysfunctionality are not the reason for the recent rise in the cost of premiums.
Furthermore, the CHO is pleased that the OFT has previously identified in paragraph 2.12 of their original report that there is a consensus among market participants that credit hire does address a gap in the market and improves the quality of service to not-at-fault drivers following an accident.
Replacement vehicle cost dynamics
Many commentators are misrepresenting the cost comparisons published in the OFT report. The CHO has issued a press release explaining these dynamics in more detail – please see the most recent press release in the “media information” tab.
Referral Fees The CHO is pleased that the OFT has listened to the CHO as part of its study and that it has concluded that (para 7.10 of their report) “there is uncertainty of the outcome of a ban or cap on referral fees. [and] it would be premature for the OFT to make a recommendation on this remedy without an in depth enquiry into the potential effects”. The CHO asks the question “Why is that the recipients of these referral fees (i.e. the insurers) want them banned?” The answer lies in the fact that insurers would rather non fault consumers do not get access to replacement vehicles at all or unless they themselves control all aspects of the claim. The CHO contends that this is not in the best interests of the UK consumer who would lose an aspect of choice (or possibly even access to a replacement vehicle at all) and it certainly goes against the spirit of free competition.