A small number of credit hire firms – organisations which buy owners’ details from insurance brokers, bodyshops and damage assessors among others, and then offer not-at-fault motorists hire cars and repairs following an accident – are responsible for inflated costs of up to £200 million a year, according to new analysis exclusively disclosed to Telegraph Motoring by Swiftcover.com.
The organisation says a “significant proportion” of credit hire agencies – estimated at about one third – consistently overcharge for work. They submit bills that are “extravagantly inflated”, often by as much as 100 per cent above the market rate.
Its findings are backed up by Honest John’s postbag, with a significant number of Telegraph Motoring readers suffering additional costs after an accident, mainly via replacement cars charged at daily rental rates.
- Repair work at well above market rates, and often for work that is unnecessary.
- Vehicle storage which is charged above market rates. According to Swiftcover it has received bills for cars that were actually stored free of charge at residential addresses.
Robin Reames, Swiftcover’s chief claims officer, said: “It’s easy to see why vulnerable motorists who have just suffered an accident use credit hire companies and it’s important to stress that we have a good working relationship with about 70 per cent of the credit hire companies we come into contact with. However, a minority is responsible for passing on enormous costs to the insurance industry and placing honest motorists at huge personal risk.”
Swiftcover’s findings come weeks after the Office of Fair Trading (OFT) said that the car insurance market was “dysfunctional”, and provisionally referred it to the Competition Commission.
The OFT estimated that artificially high car hire and repair charges added significantly to drivers’ premiums, and said that some insurers were conniving with garages and suppliers of courtesy cars to let them charge inflated prices.
When an insurance claim is made, the firm insuring the “at fault” driver has to pay for repairs and temporary car hire for the other driver. But, said the OFT, these costs can be inflated by the insurer of the “not at fault” driver. Some insurers do this in return for a lucrative fee from the car hire firm or garage involved.
According to Swiftcover, its in-house teams uncover and reject inflated credit hire claims worth £120,000 each week. Based on the size of the motor insurance industry, it says that this amounts to £200 million each year in the UK, with “an inevitable effect on car insurance premiums”.
The company says that these inflated invoices would otherwise be approved, with the cost borne by business and then passed to the consumer.
“It is possible that other insurance companies do not have the same facilities in place to query invoices and may regularly be forced to pay out,” said a spokesman. “As well as costing motorists as a community, unscrupulous credit hire companies also leave individual drivers at huge risk. When using a credit hire company, a motorist enters into a credit agreement and stands to lose thousands of pounds if the claim is eventually rejected, which it is likely to be, if inflated unduly.”
However, Martin Andrews, director general of the Credit Hire Organisation, denied that credit hire firms were “swindling” motorists or boosting insurance premiums, insisting they acted in the consumers’ interests by addressing a significant gap in the market.
Andrews said that insurers frequently failed to inform motorists they were entitled to services such as a replacement car after a collision, and that were it not for credit hire agencies, many motorists would be in the dark. He acknowledged that credit hire firms’ bills for car provision or repairs were often higher than those of the insurance industry, but said that this was because they did not have access to the same deals with suppliers that led to significant economies of scale for insurers.
Andrews said some insurers also significantly inflated motorists’ costs by shunning discounts available for prompt settlement of payments to drivers following accidents. He added that the credit hire industry and the rates it charged were strictly regulated under UK law.
“credit hire firms cannot charge more than basic hire rates available in the commercial marketplace,” he added. “The insurance industry is unhappy because it would prefer that consumers were not aware of their rights. They would rather they were unaware and caught the bus.”
Professor Stephen Glaister, director of the RAC Foundation, said that Swiftcover’s findings appeared to reinforce what the OFT had said.
“Some of those involved in the insurance industry regard it all as a nice little earner, with innocent motorists eventually footing unjustifiable bills,” he said.
“The OFT will decide in October whether to refer the matter to the Competition Commission. Evidence like this makes the case for doing so ever more compelling.”
Honest John says
“I’ve been receiving complaints and warning about the potential for hidden costs with credit hire insurance for about eight years now.
“The reader has a crash, gets contacted by an 'accident management company’, his or her damaged car is taken away for a repair that takes much longer than it should, reader signs for use of an 'equivalent’ car on 'credit hire’, which means that if the insurers don’t pay for it the reader is liable.
“I’ve seen cases where the cost of the credit hire was £15,000, £26,000, even £70,000. In many cases the sum was more than the hire car was worth.
“Unfortunately, although the insured is supposed to control his expenses, the Court of Appeal ruled in favour of footballer Darren Bent for the £63,000 hire of an Aston Martin DB9 to temporarily replace his damaged Mercedes at £573.28 plus VAT a day.”
For more information visit the Honest John website.
Source : http://www.telegraph.co.uk/motoring/news/9413143/The-credit-hire-price-sting.html