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The Credit Hire Supply Chain – Are Bad Customer Experiences giving the Industry a Bad Rep?

November 2, 2016
Posted by Gareth King


Taking a look into the supply chain relationships between credit hire companies and insurers there is definitely room for improvement. Let’s look at a typical scenario where a non fault accident is reported to the car insurer which is a common occurrence and could play out something like this…

…A supercar driver, let’s say an owner of a 10-year-old Lotus Elise, is victim to a lorry driver that doesn’t see it when driving around a roundabout during the rush hour commute. The Lotus suffers a slow speed, yet significantly damaging scrape, rendering it un-roadworthy. The driver of the Lotus then calls their insurer and a replacement vehicle is arranged through a Credit Hire Organisation (CHO) at lightning speed. The driver is back on the road the next day with a brand new Lotus Elise; after all it’s a suitable and comparable replacement vehicle and helps take the distraught drivers mind off the non-fault accident they were a victim of, and ensures that they can still get from A to B.

Fast forward several months later and the Lotus has been repaired and is back with it’s rightful owner, when a letter comes through the door. The Lotus driver has been drawn into a legal battle between the insurer of the lorry driver that hit them and the CHO that they were referred to by their own insurer. The lorry driver’s insurer has refused to pay the deemed ‘unreasonable’ costs for the shiny new replacement Lotus, and the CHO has decided to take the matter to court in the name of the Lotus driver to recover the money. Now there are three parties who are unhappy; the driver of the Lotus, the Insurance company of the Lorry driver and the CHO who’s not getting paid for its services.

Worst of all, the driver of the Lotus now mistrusts its own insurer as they referred them to the CHO who seems to have dragged them into a legal battle with potentially spiralling court fees and compensation that they could be liable for. That’s the renewal policy lost to a competitor straight away. Not to mention the CHO seen as only acting in its own interest; where is the caring and efficient customer service now?

The above example highlights the poorly understood and hard to manage process surrounding insurance and credit hire supply chains. When the CHO makes a legal claim the driver of the hire vehicle could be held liable if the third party insurer refuses to pay, since the contract and the bills are made out to the driver of the non-fault vehicle – in this case, the Lotus driver.

However, the credit hire companies are mostly acting in good faith and are bridging a gap by supplying a replacement car where the insurer is not set up to do so directly. But insurers are claiming that CHO’s are not acting within reasonable limits and causing them to face extortionate bills, sometimes double the cost of high-street car rental.

This is just one scenario that depicts how the supply chain is failing, but there are many more. Unfortunately, this all leads to a dysfunctional and distrusting market where all parties are pointing the finger. But, what’s worse, it leads to expensive litigation and higher insurance policies for end customers and a bad reputation for the industry as a whole. Therefore, there must be a way that Insurers and Credit Hire Organisations can work together more closely to provide visibility of the costs and processes so that insurers can have access to a large pool of CHO’s who are seen as trusted partners. And, CHO’s are getting paid a fair price, in a timely manner, for the much needed service they provide. The GTA, (General Tariff Agreement), has really helped to formalise both the process and the costs and now many insurers and CHO’s have signed up to it but the market still suffers from poor visibility and mistrust.

In this digital age, the technology exists to oil the wheels of this journey to increased collaboration, transparency and efficiency. The ideal solution could be a web-based portal where insurers and CHO’s can logon and work together to process the credit hire through to a satisfactory solution. Insurers could see what CHO’s are available, what their terms are and agree a price and suitable service in real-time. CHO’s could offer preferential rates to preferred Insurer partners.  This is the easy part – the hard part is keeping a good relationship and ensuring that agreements satisfy the stand point of the Competitions and Market Authority. It is a big challenge, but more so, a huge opportunity for the industry. If we list the barriers to implementing a solution such as this; we can more quickly make steps towards overcoming them.

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Gareth King – Senior Insurance Product Manager, Adjuno
Gareth is an expert in supply chain management software and has worked in the industry for over 14 years, specialising in the retail and insurance sectors. He currently manages the insurance product portfolio and future roadmap for Adjuno, who are a leading supplier of web-based supply chain software. Gareth’s knowledge and hands on experience has guaranteed the successful implementation of supply chain solutions to clients including Marks & Spencer, New Look, Randall & Quilter, AXA and Zurich Insurance.