This week, it was announced that credit hire organisation, Helphire will be withdrawing from the Association of British Insurers’ (ABI) credit hire protocol.
The stock exchange listed company confirmed that it was pulling out of the ABI’s general terms of agreement (GTA) and that the withdrawal would take effect for all hires commenced on or after 15 August 2015.
It is suggested that the reason behind its exit is the number of bilateral agreements which it has in place with insurers. Helphire indicates that bilateral agreements make up the majority of its relationships with third party insurers.
First of many?
Such a move from one of the longstanding and vocal supporters of the protocol does raise questions over its future. With Stevens v Equity balance of power in favour of the insurers, and with the parties to the GTA still in the midst of a rate review, is the withdrawal of Helphire the first of many?
Many will question the future of the GTA and wonder whether others will follow. The fewer participants (insurers and credit hire organisations) the less attractive the benefits of being a member. However, it should not be forgotten that the withdrawal of a major insurer back in 2009 was predicted by some as the death knell to the scheme. Yet the anticipated mass exodus of insurers did not come to fruition.
What we can expect is that other credit hire operators will be keeping an eagle eye on Helphire’s performance outside of the protocol. As a listed company, the effects of withdrawal (be they negative or positive) will be available for all to digest.
As to the immediate impact, considering that proposed amendments to the GTA (in the form of an electronic portal) have been discussed, it does leave us wondering whether the absence of Helphire will dilute the desire to reform? Was the introduction of what some see as ‘an expensive post box’ one of the real drivers behind its decision? And will this encourage others to be vocal about the merits and cost of proposed reforms?
It should not be forgotten, however, that less than nine months ago the Competition and Market Authority’s investigation into credit hire resulted in a recommendation of no action. This was heralded by some as an endorsement of the existing GTA scheme. This new development should at least be seen as a warning that all parties dealing with credit hire claims rest on their laurels at their peril. There is always room to develop and improve the existing practices in order to remove friction and cost which merely drives up indemnity spend, increases litigation and provides the innocent motorist with anything but a stress free claims experience.
Additionally, the move will have a significant effect on those insurers and insureds who do not have their own agreements in place with Helphire. They will need to make an early assessment of the situation. Handling a high volume of claims outside the comfort of the GTA is likely to need greater resources with the alternative being elongated hire periods and a higher volume of litigation. It will be important to ensure that they have processes in place to deal with this major shift.
Whether this development will result in seismic change or turn out to be a damp squib remains to be seen. But its potential consequences for credit hire claims handling and the possible ripple effect which it may have on the existence of the ABI GTA should not be ignored.
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