2015 Credit Hire Annual Report

Each year we have produced headline data based on our experience in the credit hire market the preceding year. In 2015 we handled more credit hire claims than ever before, tracking at over 35,000 claims per annum on behalf of insurers at the pre-litigation stage.

Our insurer clients will be aware that we prepare a comprehensive analysis pack to show our experience in detail, but here is a sneak preview of the high level trends.

The data referred to below only includes cases we received at the pre-lit stage, but closed through all forms of settlement, i.e. negotiation within the GTA, outside the GTA, litigation, repudiated etc. We have normalised our data in the market trend graphs by removing those insurer referrers who only send certain types of case, e.g. high value, or specific CHO.

In 2015 we have seen the average amount paid for credit hire decrease fairly consistently. As we will see later on, cases that sit outside the GTA, or settled through litigation, are a significant factor as the Courts now consistently apply the ‘Stevens methodology’ to rates.

We have also seen this translate to GTA claims, where a number of CHOs are far more reluctant to take claims outside of the protocol than they were historically, presumably aware of the fact the GTA rate represents a better deal.

After seeing credit repair inflate on almost a monthly basis in 2014; 2015 seems more stable with our industry average now fairly settled at £1,890 claimed and £1,800 paid. Inflation in this area was significantly impacted by a large provider of credit repair c.£550 per case more expensive than comparable providers.

There is an obvious concern across many of our insurer clients at this fact, but perhaps even more so others will look to push the envelope on credit repair over the coming months to be able to compete better in this part of the market.

We are aware of a number of initiatives being implemented to challenge credit repair over the next few months by different insurers.

Frequency for credit repair claims has remained generally consistent at c.32% of claims presented. We did see a sharp decline in November / December, however our data suggests this is the transfer of a contract with significant repair volume between two providers. 2016 to date is back to historic levels.

When we compare paid amounts outside of the GTA to those inside, we have seen a material shift in 2015. In 2014 average NGTA paid values were c.£1,650 in the Keoghs team, an amount which was lower than for a number of our clients. As Stevens’ has settled in, the average for the last six months outside the GTA is closer to £1,050 which is less than the comparable period for GTA companies.

This decline is not just restricted to rate, we have seen the larger firms outside of the GTA reduce periods with average duration now equivalent to their GTA counterparts.

Of cases that started life in our volume pre-litigation area, but subsequently litigated, we have included data on the level at which they settled. We have seen a consistent reduction over 2015, with this curve now levelling a little in 2016 to date.

Litigation rates have remained largely stagnant at c.3%, owing to a small decrease in GTA companies litigating vs a small increase in those operating outside the GTA.

Credit hire fraud

An area that continues to grow within our industry involves those claims founded on more spurious grounds. Whilst I accept these claims are in the minority, and are rarer within the GTA, we are seeing them increase. We continue to see a migration of opportunistic claimants move into credit hire from bodily injury, with approaching 18% of claims outside the GTA now being pulled into our investigation unit.

Of these claims over 65% close with no payment to the CHO at all, including cases that are dormant; critically our re-open rate is less than 1% after dormancy. The average payment overall on claims being handled within this area is c.12% (an 88% saving) of the original claimed value. We are working with many insurers on building their strategies in respect of these claims that often arise out of a genuine accident.

Our full market analysis will be released to our insurer clients in the first week of April.