Todays’ vehicles contain advanced technology such as sensors that can sometimes take months to repair if damaged. More often than not, entire components such as bumpers will need to be replaced rather than just repairing the affected area. Along with this complexity, the level of expertise in garages has increased, although Brexit has simultaneously impacted the availability of skilled workers. Supply chain issues exacerbated by the Ukraine war and the ongoing backlog from the blocking of the Suez Canal in 2021 have created delays and difficulties in sourcing parts. All of which push up costs and extend hire periods.
When it comes to non-fault claims, we also need to bear in mind that credit hire companies’ referral fees tend to be based on how long the repair takes, so there is therefore potentially less incentive to carry out the works quickly, elongating the hire period even further. Credit hire organisations (CHOs) are also taking a more aggressive approach than formerly, both in the way they are seeking to control the entire claims trajectory - from injury to rehabilitation, credit hire to recovery and storage - and in pushing more claims into litigation.
The rising cost of repairs as extended hire periods
Issues and implications of claims inflation in the credit hire space
Given that it can take months to source original (OEM) parts, and in light of the drive for sustainability, the use of green parts (taken from vehicles that are economic write-offs but where many of the components are undamaged) will inevitably increase. The availability, proof of provenance and quality assurance of green parts have improved dramatically in recent years, as more sophisticated vehicles are less cost-effective to repair and as part recovery services professionalise. Some insurers are already providing green parts for use in repairs under their own policies to get insured vehicles back on the road quicker in fault claims. Their use in non-fault claims will doubtless be tested in litigation and it will become a matter of public policy for the courts to decide. However, this is an issue that must be addressed as it could bring significant benefits in terms of faster repair times.
Supporting the use of green parts
Since it’s often the case that there is a CHO sitting behind a claim, it’s clearly vital to ‘know your opponent’, as this is not usually the claimant but the CHO. That means more than simply knowing who they are: it’s essential to dive deeper, to understand who the ultimate owners of those companies are, who are the real decision-makers and what’s driving their aims and actions. Your external legal advisers should be vital partners in this, providing guidance not just on good claims handling or litigation tactics, but how to create a powerful KYO strategy for each specific case and leverage it effectively to get the right result.
Leveraging Know Your Opponent (KYO) strategies
It’s essential to record and document any offers made to claimants, both to ensure that they cannot claim not to have received the offer, and so that you have a stronger case, should they refuse to accept the offer and the case goes to court. Contact claimants in more than one way (e.g. by letter, email and phone call), and maintain lines of communication throughout the claims process, not just at the start. Also think carefully about when and how to engage with CHOs who may be the gatekeepers of contact with claimants and who will typically seek to control the process.
Evidencing offers to claimants
One way to minimise costs and speed up repairs is via interventions such as offering to provide replacement vehicles to claimants direct. Some insurers are already doing this, but there are untapped opportunities to take this idea further and offer recovery and storage options as well, eliminating the need for a CHO to be involved at all. Given the economies of scale insurers have, this could be a cost-effective solution worth investigating.
Taking more control of the claims process
What action can insurers take to mitigate these issues?
Insurers therefore need to be on the front foot by:
It’s a challenging outlook, but there are several innovative and proactive solutions insurers could deploy to limit the influence of CHOs, demonstrate that you are taking a fair and proportionate approach with claimants, and speed up repair times while minimising claims inflation. Getting intervention right, being able to show that you have engaged constructively with claimants (and CHOs where necessary), crafting a fitting KYO strategy and taking up the mantle to encourage the use of green parts will all have a major impact on indemnity spend.
In cases where credit hire is involved, there can be many moving parts, several different parties to consider, and plenty of competing priorities to take into account. So what’s needed is creative thinking and a robust strategy that looks at the whole claim from beginning to end, is tailored for the circumstances and has been designed with achieving specific outcomes in mind.
Underpinning all this, a strong relationship with your lawyers is a critical component of success. At Clyde & Co, we don’t just consider claims on their face value, we take a much broader and deeper approach to understand what’s really going on behind the scenes and help clients find ways to manage claims holistically in the most cost-effective way – both now and looking ahead.
Innovative and proactive solutions
Get in touch
It’s a challenging outlook, but there are several innovative and proactive solutions insurers could deploy to limit the influence of CHOs, demonstrate that you are taking a fair and proportionate approach with claimants, and speed up repair times while minimising claims inflation. Getting intervention right, being able to show that you have engaged constructively with claimants (and CHOs where necessary), crafting a fitting KYO strategy and taking up the mantle to encourage the use of green parts will all have a major impact on indemnity spend.
In cases where credit hire is involved, there can be many moving parts, several different parties to consider, and plenty of competing priorities to take into account. So what’s needed is creative thinking and a robust strategy that looks at the whole claim from beginning to end, is tailored for the circumstances and has been designed with achieving specific outcomes in mind.
Underpinning all this, a strong relationship with your lawyers is a critical component of success. At Clyde & Co, we don’t just consider claims on their face value, we take a much broader and deeper approach to understand what’s really going on behind the scenes and help clients find ways to manage claims holistically in the most cost-effective way – both now and looking ahead.
Innovative and proactive solutions
It’s a challenging outlook, but there are several innovative and proactive solutions insurers could deploy to limit the influence of CHOs, demonstrate that you are taking a fair and proportionate approach with claimants, and speed up repair times while minimising claims inflation. Getting intervention right, being able to show that you have engaged constructively with claimants (and CHOs where necessary), crafting a fitting KYO strategy and taking up the mantle to encourage the use of green parts will all have a major impact on indemnity spend.
In cases where credit hire is involved, there can be many moving parts, several different parties to consider, and plenty of competing priorities to take into account. So what’s needed is creative thinking and a robust strategy that looks at the whole claim from beginning to end, is tailored for the circumstances and has been designed with achieving specific outcomes in mind.
Underpinning all this, a strong relationship with your lawyers is a critical component of success. At Clyde & Co, we don’t just consider claims on their face value, we take a much broader and deeper approach to understand what’s really going on behind the scenes and help clients find ways to manage claims holistically in the most cost-effective way – both now and looking ahead.
Innovative and proactive solutions
Get in touch
Get in touch