Compare the Credit Hire Scam Peugeot VW Golf estate. 215 VW Passat. 450 Vauxhall. similar. 320 Vauxhall Zafira 7 Seater

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1 Compare the Credit Hire Scam Type of Car ABI Budget Hertz Enterprise Europcar Sixt Comparison Website TravelSuperMarket.com Small Family Car Band S incl VAT per Day Peugeot KIA Picanto 1.0ltr Ford KA or (Class A Mini) Peugeot 107 N/A 90 (Atlas choice) searching for Mini Economy. Model on offer Toyota Aygo Biggest Average private Difference car rental Medium Family Car Large Family Car Band S incl Band S incl VW Golf * Astra N/A 374* Insignia or Ford Mondeo or (class E intermediate) Insignia or 215 VW Passat 450 Insignia or VW Golf estate Insignia, Citroen C5, Ford Mondeo (Arguscarhire.com) Searching Medium Family Car. Model on offer Volkswagen Golf Tdi (Arguscarhire.com) Searching Large Family Car. Model on offer Ford Focus Automatic or MPV# Band M incl VAT per Day Prestige Vehicles# Band P incl Peugeot Group G - e.g. Mercedes C- Class 1.8 Auto or Ford Galaxy TDCI Zetec or 599 Audi A4 Auto or Similar Volkswagen Sharan, Ford Galaxy or 5 doors 7 seater Mercedes Benz C Class, BMW 3 Series or 320 Zafira 7 Seater or 599 AUDI A4 or 292 Zafira 7 Seater or BMW 3-series Aut.Mercedes- Benz C-Class Aut., Audi A4 Aut. 222 (CarHire3000) Searching people carriers/vans. Model on offer Zafira 7 seater or Similar 317 (CarHire 3000) Searching Luxury Car. Model on offer Mercedes-Benz C- Class or Similar Commercial Panel Van # Band PV incl Group A - e.g. VW Caddy Small Van or (D4) Ford Transit 280 SWB 6.55m3 or Vivaro Van, Short Wheelbase Ford Transit or FORD TRANSIT 280 SW or N/A N/A

2 Methodology The offers provided were obtained on Monday 19 th September and Tuesday 20 th September (all offers of car hire for 20/9 are indicated with a #) Car or van to rentals were for 7 days from Wednesday the 21 st -28 th when searching on Monday, or from Thursday 22 nd -29 th when searching on Tuesday 20 th September, to provide equal notice of rental. ABI prices shown are indicated by their band eg.s1 and their daily rate plus VAT. The number above shows the weekly (7day) pricing. All other private rental comparisons are priced accordingly. The ABI rates were from the ABI GTA agreement that can be found here: All cars named are within the ABI banding or comparable cars based upon their engine size or passenger capacity. All rentals to be picked up at 10 am and delivered back to the same place at 10 am. All rentals where made from London dealerships. If further details were required, the driver was over 25 and had their licence for over 1 year. There was no extra insurance or added extras in any of the offers made. Offers on car and Van hire websites (or confirmed on the phone where marked by *). The table is indicative of the cheapest possible price whether available. Biggest difference is the ABI weekly figure minus the cheapest possible comparable rental. Average private rental is the combined quotes divided by as many as were provided. Where a space is marked with N/A this indicates we were unable to make a rental of a comparable vehicle on the days in question.

3 AJAG Briefing Insurers inflated claim scams, and how to deal with them These are one insurer s scams as against another. Whilst on the face of it, it appears counter intuitive it can be explained by market economics. If one insurer can increase another insurer s liabilities, then that will have an upward pressure on the second insurers premium quotes, giving the first insurer a market advantage, if that insurer can inflate its competitors compensation bill more than those competitors can inflate the first insurer s claims bill. Of course, one claim in itself would have little effect but the cumulative impact of large numbers does. The most obvious two examples of this are the credit hire rip off and the body shop fiddle. There is nothing in it for the lawyer or CMC to inflate the claim as the work is the same, irrespective of these elements value. There is little in it for the claimant, though the insurance industry itself estimates that credit hire alone adds 44 to the cost of each premium. To show just how much the insurers overcharge, we have done price comparisons, which are attached at the end of this briefing. The system operates under an ABI brokered agreement known as the GTA agreement which sets out the process, a very long list of the insurers involved, and the approved hire rates. The Credit Hire rip off Under this merry-go-round, the object is to beat the other insurer to the claimant, incited by the GTA agreement procedures. The law quite rightly says that if you have an accident that is the fault of another, you are entitled to have the damage to your car repaired, and while it is off the road, (or until written off) you are entitled to claim for the cost of a replacement. If the liability insurer offers you a vehicle, assuming it is roughly equivalent to your damaged car, then you are expected to take it (if you want a temporary replacement). However, your own insurer, when you notify them of the claim, now offer to organise a hire car (banking a referral fee in the process) and that cost is then claimed from the liability insurer. As soon as possible after an accident, perhaps within hours, a credit hire company becomes involved. The deal provides for a replacement vehicle, often of a higher standard than the vehicle that is off the road, at ridiculously high daily rates known as the spot rate (the rates are actually set under the ABI GTA agreement) the cost of which is then included in the claim. Sometimes the clamant doesn t even want a replacement, but is browbeaten into taking one. Hiring periods often start on a Friday, to straddle a weekend which pushes the period up. The costs mount up rapidly, especially if the liability insurer takes its time to inspect the vehicle and authorise repairs or write it off. In the

4 end, it becomes cheaper to write off what may be a perfectly serviceable car of comparatively high value than risk running up hire bills. The body shop repair fiddle Here, the claimant s insurer has a sweetheart deal with a body shop ( in return for a referral fee) The insurer quickly refers the claimant to their preferred vehicle repairer, who produces a repair estimate that is out of all proportion to the damage: replacing a bumper that only needs a touch up of paint, for example. Linked to the car hire s ever increasing bill, the liability insurer is faced with Hobson s choice and the excessive high value repair is carried out. Again, there is nothing in it for the lawyer to inflate the claim as the work is the same, irrespective of the repair cost. In both instances, there is no benefit to lawyer or CMC in this practice. CMCs get no referral fees from bodyshops. Referrals are mainly through the claimant s own insurer who beat everyone to the draw. These ancillary services are vital sources of income to insurers (for example, ancillary income including referral fees made up 54% of Admiral's 2011 first half year UK motor profit) not only costing the claimant as part of the insurance premium but also adding significantly to the claim s overall bill to be met by the liability insurer. As they are in it together, the insurers, car hirers, and body shops all profit and the loser is the motorist in his inflated premium. The solution End the ABI s sweetheart deal with the credit hirers as to the charging rates. The primary obligation to provide a replacement vehicle should lie with the liability insurer. Bodyshops should be manufacturer approved and industry accredited, not just insurer approved. Set a protocol timetable for maximum default hiring periods and repairs at a fair cost. The liability insurer should have up to 48 hours after notification of a claim to provide an equivalent replacement vehicle. If the liability insurer fails to do so, only then may the claimant hire a vehicle (subject to the current mitigation rules). No hire charge claim is normally to be permitted prior to the expiry of this 48 hour period. In very exceptional or emergency cases, the claimant may hire a car (of a maximum specified hire class, which may well not be an equivalent) between the accident and the expiry of the 48 day period. It would be for the claimant to prove such a very exceptional hardship or emergency need. Such a hire period should in any event be limited to a maximum of 5 days and would in any event be terminated on the provision of the liability insurer s replacement. The liability insurer must be notified of the fact at the same time notice is given of the claim. Within 10 days of notification of the claim, the liability insurer must inspect the vehicle and authorise repairs either in accord with the claimant s proposed repair estimate from a manufacturer approved and vehicle repair industry accredited bodyshop, (with an agreed timescale for doing them) or on a reasonable alternative basis, write the vehicle off. (If agreement on repairs is not reached, then a default position is set out below).

5 Only if the liability insurer fails to provide a replacement vehicle within the 48 hour period, is a set default credit hire is permitted, limited to a fixed period, rather than spot day rates. This fixed period should normally be a maximum of two weeks, including the proposed 10 day protocol inspection and authorisation period. After that, the hire period may only be extended if the liability insurer defaults by again failing to provide an equivalent replacement car to take over from the hired vehicle; and such an extension of the hire period should only be for the agreed repairs period. If the claimant does not agree with the liability insurer s repairs assessment, or incurs hire charges outside the protocol, then he is on risk of not recovering the full cost of repairs or hire charges. Equally, if the liability insurer has been unreasonable in its approach to repairs or fails to meet the protocol timetable or offer a replacement, then it is on risk for the full repair estimate proposed by the claimant and continuing hire charges, directly caused by the liability insurer s default. Any referral fees for both credit hire and bodyshop repairs should be replaced with a reasonable, fixed price, transparent commission, either agreed within the industry or imposed by the court. In any event, the proposals above would have a market forces effect in pushing down such payments. The court, as a failsafe, should be empowered to go behind any claim to enquire into the reasonableness of any charges. These proposals preserve the claimant s right to a replacement vehicle and to have his car repaired, but do so at a reasonable cost and in a fair and balanced way, with appropriate safeguards against exploitation by any party involved.

6 RSA repair firm fabricated charges - judge 15 September, 2011 Insurance Times An RSA subsidiary company fabricated charges to boost profits, a High Court judge has ruled in a damning verdict on the insurer s controversial subrogation arrangements. Judge Platt, sitting at Romford County Court, said that if RSA s subrogation model was adopted by the rest of the market, the cost of minor motor repair claims would be inflated by 25%. Platt threw out a claim by RSA customer Kevin Fallows last week for 1825 repair bill, which he was seeking to recover from the defendant Hawker Transport via subrogation. In non-fault accidents, RSA uses a subsidiary company RSA Accident Repairs Limited (RSAARL) to charge third party insurers for repair costs. RSAARL either carries out the repairs itself or uses a sub-contractor to do the work. RSA was seeking to claim from the defendant s insurer not only the costs charged by the vehicle s sub contracted repairer DWS but RSAARL s add on costs. The amount claimed in RSAARL s invoice was higher than the amount invoiced by the actual repairing garage. RSAARL charged an hourly labour rate of 39.50, 3.50 more than the sum charged by its subcontractor even though it had not done any of the work itself. RSAARL also charged a figure of for sundry allowances, such as washing and cleaning. He said: These repairs were actually carried out by DWS and there is no evidence that the vehicle actually went through the hands of RSAARL for repair. Indeed the fact that RSAARL have charged exactly the same number of hours as DWS must lead to the conclusion that such items as environmental charge, washing cleaning, de-nibbing final inspection and road test cannot have been done or incurred by RSAARL and this item is simply a fiction invented by RSAARL. Ruling on RSA s arrangement, Platt said : "There is no evidence put forward to explain why it is reasonable for RSA to impose an intermediary company into the chain of transactions. The effect of the arrangement which RSA has sought to implement is at best to pass on to the defendant's insurers some part of the administration expenses incurred by RSA in dealing with the claim thereby inflating the total repair costs. Other and less innocent explanations are not necessarily to be rejected out of hand The effect of inserting RSAARL as an intermediary simply inflates the ultimate cost by increasing the hourly rate and adding extra charges, one of which I have disallowed in any event as a fabrication, and another as not reasonably incurred. If RSA chooses to carry on its business in that way it is entitled to do so but it is not entitled to allow RSAARL to add on what it pleases and then expect defendants to pay a sum which is not the true cost of repairs. Since RSAARL is wholly owned by RSA the effect of these extra charges if they are paid by defendants is simply to boost RSA Group's profits beyond the actual cost of repair by the margins inserted by RSAARL

7 Platt said RSA had no legal basis for taking such a course of action and that it s subrogation arrangements were not in the public interest because they would inflate overall motor repair claim costs. Background to RSA: UK s second largest Commercial insurer. Outside of Lloyd s, RSA is the leading insurer and second in both Property and Motor. Fourth largest Personal lines insurer in the UK overall, as well as being fourth in Motor, Home and Pet RSA has posted pre-tax profit of 376 million for the six months to the end of June 2011, with the figure up 25% on a year earlier. Net written premiums increased to 4.2 billion, up 10% year-on-year, driven partly by the benefit of 2010 deals. The group recorded an underwriting result of 206 million (H1 2010: 136 million) and says it remains confident of a strong performance for 2011 as a whole, with continued strong profitability at its international division and double digit net written premium growth in emerging markets. In fact, RSA s emerging markets business remains on track to double premiums, to around 2.2 billion, by the end of In the UK, the insurer saw premiums rise by 7% in the first half, to 1.57 billion. In UK personal lines, the group s underwriting result almost doubled, to 27 million, driven by household but offset by a commercial lines loss of 19 million, reflecting continued challenging conditions in commercial motor, plus the impact of catastrophe events in the early part of the year Profits 2010 Year ending 31 December 2010 Group Results summary 12 Months months 2009 Movement Net written premiums 7,455m 6,737m 11% Underwriting result 238m 386m (38)% Combined operating ratio 96.4% 94.6% (1.8)pts Operating result 636m 777m (18)% Profit before tax 474m 554m (14)% Profit after tax 355m 419m (15)%