Every quarter Keoghs’ Credit Hire MI Analyst, Andy Lane, produces several reports detailing analysis of credit hire spend. This includes such relevant data as; the average cost of hire, repair, durations, and litigation performance and we share these findings with clients regularly.
Analysis of the data highlights trends in specific areas, but more importantly at Keoghs we also have the ability to show the total spend across the whole credit hire landscape from GTA notification to trial.
Other data we see and are quoted in the market often excludes a number of claims, particularly if insurers use a number of providers along the chain with differing data sets. Common examples include high value claims that don’t settle on the basis of the pre lit offer or the results of concluded litigation. In this edition of Credit Hire AWARE we have decided to publish some of this information as we have recently, and unsurprisingly, been inundated with requests by clients as they look to decide on how they are best set up in this new, post-CMA, world.
Below are 2014 high level stats to the end of quarter 3 across all methods of settlement, for claims handled from the outset by Keoghs (all figures include VAT).
We are seeing that durations are fairly consistent and flat despite reports of inflation in this area by several clients. This may be due to the fact Keoghs dual monitor claims and are therefore not seeing this rise. The average duration on settled claims in the last quarter is lower than the previous two quarters but one would expect that with seasonality causing lower durations. In terms of the reductions we see on credit hire, specifically those settled in our volume teams, c.60% is due to the period of hire and 21% is due to the vehicle provided. Liability is at 7% but this does vary between CHO.
Although frequency of credit repair is down approximately 5% when compared with 2013; the average value has increased by 9%. The main providers of credit repair services are the Top 5 GTA CHOs. Credit repair however, only occurs on 18% - 35% of their volume depending on the CHO.
Typically broker based referrals lead to credit repair and we are seeing a reduction in such claims stemming from insurer referrals. We suspect this trend could continue as insurers look to maximise utilisation of their own networks post CMA to look to increase negotiating power on cost.
The average cost of credit repair ranges from £1,400 to £1,950. The average claim presented by some ‘mainstream’ providers are now equivalent to those typically associated to repairing a number of high end vehicles and taxis. This makes no sense and raises a number of questions.
We see some clients with a litigation rate of almost 50% on Non GTA claims; typically two CHOs are the main protagonists. The statistics show, on average, that these CHOs recover less than they were offered pre-lit by our teams.
This would suggest the driver for the litigation may be their costs when incorporating a claim for injury in the litigation. Clients are feeding back that they are experiencing a range of portal tactics such as adding engineer’s reports pre stage 2 pack without the request of an interim, but also varying methods of retaining or pulling claims from the portal. The Keoghs case of Bewicke-Copley v Ibeh reported in Credit Hire AWARE 5 is an example of this.
In the first half of the year we saw a reduction in appetite to litigate on credit hire claims. The courts have proved a relatively defendant friendly area with some GTA CHOs seeing a c.35% reduction from the original GTA amount on average. However, in the 3rd and 4th quarters litigation is on the rise for almost every insurer we act for. Our own claims are the exception to this with rates fairly static between 0.9 and 1.3%.
This is a challenging time for insurers to make the right decisions about their credit hire structures going forward. Having the data to support those decisions cannot be under estimated, and from our review certain CHOs really need to be held to account.
This is not a ‘tar and feather’ exercise of the credit hire market, the service is an important one to many, but there are those who appear to have processes that make no sense to me as someone who spent several years as a Claims Manager at one of the largest.
John Gibson
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