Moving on from the CMA

Now the dust has settled on the CMA investigation, we know that its failure to find a constructive way forward for the credit hire/credit repair market means we are back to where we were in 2011; compensators saying they are paying too high a price for replacement vehicles and CHOs focussing on getting paid.

Over the past couple of months I have read with interest how both sides of the market see the way forward. I have particular concerns around the language being used and some of the apparent positions being taken. Indeed, I do feel that at times we forget the service provided to consumers by the credit hire market.

Whatever the views of compensators in relation to cost, is there, at this point, a credible alternative for the motorist who is involved in a non-fault accident and loses their mobility?

As the first autumn deluge of rain hit the northwest the week the CMA reported, I was driving down the M6 and wondered how my partner (in our one car household) would get our eight year old child the five minutes to school and the further five minutes to work without getting soaked to the skin. Then I reflected that there could well be hundreds of similar scenarios that morning; people who had lost the use of their car after an accident in poor visibility the night before.

Would there be an insurer out there, or even one of my own handlers, who told them that they didn’t need a car because they could walk - for 10 minutes or more, with a child or two, in the rain, with an umbrella? Would I actually advocate that as a response to someone who, through no fault of their own, had lost the use of their vehicle? Of course we’d say get a taxi and keep the receipt, but it highlighted a point to me that we are rightly concerned with cost at certain times but not necessarily with the genuine practicalities of an individual’s need for a car, and how they can get access to it - with minimum disruption to themselves - straight away.

My view on credit hire is that it provides a great service to a number of consumers who have no large scale credible alternative which spans the market. Conversely, I also see, day in day out, processes and procedures which are not designed to help the consumer but are purely for the benefit of those who profiteer from friction and delay.

Over 20% of new notifications my GTA teams receive never go into hire. Those notifications are at times sparsely populated, and unclear on service provision – why?

I have read the letters that go to some hirers from CHOs telling them not to speak to insurers whilst liability is assessed because they do not have their best interests at heart.­I also regularly see CHOs sending a notification to an insurer in situations where the potential customer has just been left a voicemail about services.

As we have ‘first to the customer’ under the GTA, this arguably prevents the insurer assisting that consumer for a length of time whilst the CHO decides whether they can provide services. If the CHO ultimately does not provide services for any reason, the consumer has been left with no vehicle when the insurer may have provided one. Is that in their best interest?

Undoubtedly rates are too high and should be reduced, but I also think the CMA’s reluctance to outlaw referral fees, as we saw in the PI market, is a monumental mistake. CHOs are asked to pay £300+ per hire at the outset of a claim, together with, perhaps, an uplift for credit repair.

I don’t think many CHOs would complain if that drain on cash flow were removed and passed back to the market in reduced rates. Indeed, most players are already prepared for such an eventuality.

Insurers have to make a compromise if they want fundamental change. It doesn’t require the CMA to investigate the market and to make recommendations, insurers have it within their gift to write vehicle provision into a policy for example.

CHOs have said to insurers the only way to move forward is via a portal. On hearing this,I find myself asking, “that must work because the MoJ portal has solved all the ills of the personal injury market…hasn’t it!?” The CHO market is a little naïve to presume that the issues with the GTA for insurers are all in the transaction of claims, and that an electronic post box will see most claims are paid quickly and friction removed.

There are numerous fundamental issues which need to be discussed and resolved before the introduction of any portal. For example, any portal would have to be mandatory (just as it is in the personal injury field) otherwise it simply will not be effective. Such an approach would likely require some form of primary legislative change, which is ironic given the CHOs responses to the CMA.

I also would question whether the message coming back to insurers from CHOs has changed from their position when insurers were having to consider the potential reality of assessing liability within three days of a notification of hire, as suggested in the CMA provisional remedies? Such scepticism is commonplace in the credit hire arena and it highlights what is probably the central barrier to comprehensive reform, namely trust.

If there is to be a central electronic platform to transact claims, CHOs must accept that insurers need to be satisfied the data put into a portal is accurate and managed in the way they would like - an issue highlighted by the CMA as ‘separation’ - and the problems that causes. I know of a number of widely used electronically supported claims platforms and they don’t necessarily remove friction. So insurers have to know what a portal delivers for them other than a software platform onto which notifications can be made and information can be held. It should only be implemented if it delivers genuine market change in terms of better managed periods, a reduction in daily rates, and if it allows and encourages a holding up of a hand when a claim goes wrong.

I see the benefit of making the GTA work and reducing frictional cost. But that comes down to addressing the fundamentals of the GTA that won’t work whether we have a portal or not. We have to fix the rest of it as part of the process and a portal can then provide the framework to support the process if appropriate and necessary.

I have plied my trade in management positions on both sides. I am, I hope, fairly pragmatic and can see the benefits to the consumer of the service CHOs provide. I can also see how the CHO market does not help itself and at times certain elements continue to needlessly antagonise the compensators paying the claims.

Managing a credit hire department as large as any in the defendant legal fraternity I can confirm hand on heart, no one from either side will win from World War III. All that will happen is that legal costs increase, lifecycles go out, cash flow drops…..which is funny really; because none of those benefit the customer and I thought of none of those when I initially looked out of the window at the rain last month and considered customer mobility.

I will end with a cautionary tale my eight year old reminded me of as I wrote this, which, given the press releases recently referencing bears, is quite apt:

“Once upon a time there were three bears. The bears were all different shapes and sizes and they all had their own bowl of porridge. One day a young lady called Goldilocks walked through the open front door and started taking the bears’ porridge.

“One bear’s porridge was a little hot for her liking, and one was a little cold, but the other was just right. Goldilocks stayed in the house all morning and ate all the porridge. She then sat in the bears’ arm chair, put on the bears’ TV and enjoyed the bears’ home to her hearts content. She fell asleep having filled her herself down to her shoes. But then the bears came back and saw what she had done; and the bears were not pleased one little bit.

“There then followed 10 years of litigation between the parties after which Goldilocks’ hair was not so golden anymore and the bears had sold their house to pay for their legal fees.