November 4, 2009

The thinking broker’s management magazine Professional Broking recently published a fascinating opinion piece on the vexed issue of credit hire (CH) from Groupama claims bloke Phil Bird.

Recognising, however, that busy people like you have more pressing concerns than leafing through quality trade publications, we here present: Bird on Hire: The Digested Read.

CH is controversial. Some brokers like it, some don’t. Referral fees can be lucrative. CH providers’ service is sometimes better than insurers’.

Most insurers think CHOs add extra expense by giving drivers better cars than they deserve. CHOs’ dogged pursuit of uninsured losses inflates claims costs. As does credit repair. As does CHOs referring PI cases to solicitors.

CHOs have no interest in keeping down the – often disputed – bills they present to at-fault insurers. Disputes add more cost.

Insurers lose control when CHOs get involved. They do not like this. But insurers are partly to blame. Eligibility for replacement vehicles is far from clear-cut. So an instant no-fuss offer from a CHO is tempting to the punter.

If insurers outsource first notification (FNOL) they inevitably lose some control. Ironic that they’ve done this based on cost!

Most brokers’ business models depend on some form of referral income. What can insurers do?

Up to 5% of motor premium reflects “excessive” CH costs. Insurers want to be the first point of contact again. They want to identify and service no-fault claimants themselves to cut costs. This entails upfront outlay and ongoing costs – tough with average operating ratios up at 120%.

Creating a level playing field requires market-wide coordination. Could the ABI help? Is legislative change required – forcing people to inform insurers?

Or should insurers sleep with the enemy, cutting deals with CHOs for speed and preferential rates. But this means ditching the GTA, which could exacerbate disputes.

Something must be done.



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