25 November 2008
When it comes to the crunch on credit!
The Accident Management Association (“AMA”) today called on insurance companies to work more closely with credit hire operators to settle claims quicker and more efficiently in order to minimise claim costs and reduce the escalating number of claims going to court.
AMA confirmed its unqualified support and commitment to the Association of British Insurers General Terms of Agreement (“GTA”) which establishes best practice and rates for the provision of replacement vehicle services to customers involved in road traffic accidents where the costs are recovered from the insurer of the negligent party
Tony Baker, Director General of the AMA, commented:
“The GTA aims to be beneficial to all parties involved – customers, insurers and credit hire providers. However, it is not working as effectively as it should as insurers are not committing enough resources to check and process claims as required in the agreement. This is leading to delays, increased litigation and higher claims costs. Insurers can save tens of millions of pounds a year by getting their act together and thus avoiding penalty charges and legal costs. Inefficient insurers are adding to the cost of motor insurance.”
Established in 1999, the GTA is a protocol between the majority of UK insurers and most of the credit hire industry which defines the process for managing claims involving the need for a hire car following an accident. In that protocol, insurers acknowledge that by collaborating with the hire company they gain administrative efficiencies, careful monitoring of claims and cost savings as hire charges are submitted at rates which are agreed annually by credit hire companies and insurers.
In addition, and as part of subscribing to the protocol, credit hire operators ensure that they both comply with the professional standards required and operate their business in a manner which is consistent with the objectives of reducing the total direct and indirect costs of accident claims.
The GTA requires insurers to process claims in a month or otherwise pay agreed set penalty charges of up to an additional 15% of the costs. If they fail to settle the claim within 90 days, then a credit hire company can issue on the claim at their commercial rate.
A recent survey of credit hire providers has shown:
- The great majority of insurers fail to pay claims within a month so most insurers are paying significant penalty charges for late payment.
- On average over 30% of claims are unpaid after 90 days forcing the credit hire provider to take legal action for recovery.
- Where legal action is taken insurers on average pay about a quarter more than the rates in the GTA and have significant additional costs as invariably they have to pay their own as well as the credit hirer’s legal costs.
- The main reason for delayed payment is lack of insurer staff resources and training.
- Credit hire has been expanding by over 20% a year as increasingly insurers are referring clients to credit hire companies for the provision of a fast and efficient service. However, insurers are not gearing up to deal with the resultant claims.
Notes for Editors
1. Enquiries to:
Director General, Accident Management Association
Tel: 01920 465000
2. AMA has 31 members who account for around 70% of credit hire and credit repair business in the UK.
3. The credit hire industry provides a service to people by assisting them with an insurance claim where their vehicle has been damaged in a motor accident. The main elements of the service are the provision of a replacement vehicle (credit hire) and arranging repairs (credit repair). The turnover of the industry is thought to be in the region of £900 million a year.