The Competition and Markets Authority’s decision not to address the rising cost of credit hire has led to a “free for all” in credit repair cost inflation, according to insurers, who have vowed to unite to tackle the issue. In the five months since the CMA published its final report on the UK private motor insurance market, which did not include proposals on tackling credit hire costs, industry players have raised concerns over the “real risk” of fraud within the credit repair sector and subsequent cost inflation.

A report conducted by law firm Keoghs calculated the average cost of credit repair had increased from approximately £1650 to £1850 over the course of the past 12 months, with labour rates rising from between £35 and £39 an hour to between £42 and £43. Keoghs partner John Gibson also noted an increase in the cost of replacing parts and that charges had been introduced for vehicle collection and return.

He told Post: “The CMA report certainly hasn’t helped matters. Credit repair firms are becoming entrepreneurial as it has become apparent that more income can be derived from the practice.”

Having decided to explore the issue in greater detail, LV is among a number of major motor insurers that have identified an uptick in credit repair spend.

Clare Lunn, head of claims crime prevention at LV, told Post: “One of the biggest issues is that the engineers seem to be facilitating [the inflation in credit repair costs].

“In the same way, we’ve had issues with medical experts in the past that has led to us introducing greater independence, accident management companies and hire providers all seem to use the same engineers and there is a clear dual ownership and mutual benefit coming out of the inspection.”

Commenting on the link between the lack of action on credit hire in the CMA report and recent inflation in credit repair costs, Lunn added: “We were all disappointed with the lack of action to tackle the credit hire issue and that has resulted in a bit of a free-for-all to inflate the repair costs and hire periods.

“We need to put on a united front and put forward a proposal. Credit repair is an area the fraud task force should look into.” In the aftermath of the publication of CMA report, Association of British Insurers director general Huw Evans bemoaned insurers’ inclination to present individual submissions based on specific models – and the credit hire fraternity’s success in presenting a united front – as one of the main reasons the ABI and its members were left disappointed.

Asked by Post whether lessons needed to be learned by insurers in order to combat the escalating cost of credit repair, Andrew Morrish, claims operations director at Aviva, said: “Yes they do. It seems like the most likely way for this to be tackled would be for insurers as a whole to act jointly.

“That said, there are challenges around that, people work with different structures and at different paces, but I’m pretty sure – in hindsight – most insurers would look at the CMA review as a missed opportunity.”

He added: “[Credit repair] is something we need to keep an eye on. One of the things we said to the CMA during its consultation was that if you don’t act wisely around this then you open the door to other areas of credit type claims – and repair is an obvious one that adds more detriment.

“It’s on our radar and we are seeing early trickles [of fraudulent behaviour]. We are hearing that more people are looking to [get involved in credit repair] in the absence of anything constraining it. I would describe it as a pretty real risk.”

Ageas claims director Rob Smale has also vowed to continue to review credit repair claims expense amid cost inflation concerns. He said: “At Ageas we are aware that this type of practice occurs and our data suggests inflation pressures are driving up costs and frequency. We perpetually review all claims costs including those submitted for credit repair and our people are shown the skills and have the support required to ensure we keep these under control.”

Meanwhile, former Direct Line Group head of counter-fraud operations and ex-Insurance Fraud Bureau technical board member Paul Hubbard has calculated that credit repair invoices are being overstated by up to 30%.Hubbard, who is now business development consultant at claims costs analysis firm UKMETS, said the firm had investigated between 150 and 180 cases and that the results had been “startling”.

He told Post: “We are seeing the range and extent of issues that cannot be put down to the odd mistake and are systemic in nature. “Our statistics show that credit repair invoices are being overstated by 20 to 30%. Most interestingly the issues we see also result in the repair period being extended. This means that we have also been able to show a link between this and the length of credit hire, amounting to an additional six days on average.

“One of our biggest concerns is that all the cases we examined have involved an ‘independent’ engineer’s report commissioned by the claimant’s accident management company.

“This has made me to wonder if the ‘independent motor engineer’ is truly independent. The industry has had concerns at independence of medical experts to the extent that Med Co has now been created. I would suggest that we are in the same position, with some motor engineers who have links to accident management companies.”

An ABI spokesman told Post that credit repair is not an area it had looked at in any detail yet.

Reproduced with permission, from original article in the Post Magazine – postonline.co.uk