The Competition and Markets Authority (CMA) published its final report into the private motor insurance market on 24 September. In many ways the report’s lack of positive action was unsurprising due to the steady communication of reductions in the calculated adverse effect on competition (AEC) and the recent bombshell that the CMA had proposed remedies that were not within its gift or power to implement.
Given expectations and the thousands of hours insurers have spent in providing evidence to the CMA, the final outcome is extremely disappointing. In their investigation into the private motor insurance industry the only positive action the CMA have taken is in the areas of:
A timetable has now been published by the CMA detailing the implementation of these measures:
With four CHO members holding a market share of well over 50%, and differences in models less diverse than those of their insurer counterparts, it was much easier for the CHOs to co-ordinate a consistent response in attempting to preserve the status quo. This approach clearly received some traction with the CMA, Alasdair Smith recently suggesting in the press that the results of the consultations were, “decisive.”
In short the CMA has scrapped all proposed remedies in respect of credit hire. In many respects the market has stagnated for 12 months with a common strapline being ‘let’s see what happens with CMA.’ Now there is a line from which all must move on from. The potential ramifications are:
We do not subscribe to the view that the lack of action from the CMA will see the advent of a new wave of aggression from CHOs who feel they have a mandate to take the fight to insurers. If that were the case, why have they not done it before now? In the last four years we have seen the volume credit hire industry consolidate but it has also reacted to the boom and bust market that was. We have witnessed de-scaling of fleets, reduction in repair network sizes and the centralising of operations. Additionally the following upfront costs remain for many:
As well as adding a number of months onto the cash collection process and increasing their potential liability for costs, our experience is that CHOs tend to recover significantly less than the GTA amount through litigation. Where is the incentive for CHOs to dramatically change approach from that we see today notwithstanding the CMAs findings? If anything, moving forward, we see the large CHOs having an increased appetite for the creation of a portal and/or the increased use of protocols.
The failure by the CMA to adequately address the real and significant issues facing insurers in relation to credit hire, and in particular to close down practices that clearly do not benefit the consumer, means that insurers will now have to re-appraise existing strategies in relation to non-fault claims and subrogated models. How these strategies and models develop will have just as important an influence on the development of the market as the reaction of credit hirers.
John Gibson
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