Credit hire market overview – key questions for insurers

In our recent Motor Webinar Wednesday, John Gibson, Motor Services Director at Kennedys offered some thoughts on key questions arising from his recent credit hire market overview. Here we provide a brief summary of some of the main areas of discussion. For more detail on the issues considered, a recording of the webinar on 29 March 2023 is available here.

Is a combustion engine vehicle a reasonable replacement for an electric or hybrid vehicle during the period of repair?

Where the owner of an electric or hybrid vehicle has a non-fault accident, a question that often arises is whether a combustion engine vehicle would be a suitable replacement hire vehicle during the period of repair.

In such circumstances, understanding what would be acceptable to the owner of an electric vehicle (EV) or hybrid vehicle (HV) will help determine whether the replacement will need to be a similar vehicle or whether the owner may consider other options, including potential carbon off-setting proposals and contribution to fuel costs.

Insurers will often have charity partners and a potential carbon off-setting option could be a donation in the insured’s name to a local or national scheme that organise initiatives such as beach clean-ups, or litter picking in parks or public areas, for example.

Insurers must, however, be mindful that carbon off-setting is subject to different assessments and caution must be exercised to avoid the risk of potential arguments between parties as to which assessment is right.

Prioritising intervention around these vehicles and putting a sensible offer to claimants, will help reduce hire costs.

Replacement EV/HVs is an area that is currently subject to a rates review by the GTA Technical Committee.

How do you deal with taxis over five years old?

Local authority licensing requirements may stipulate that to licence a new vehicle it must be under five years old. In those circumstances, where a hire vehicle that is over five years old is written off as a result of an accident, assessing what the insurer’s liability is, is not straightforward. Is it the value of the vehicle as is? Or is the liability to replace with a vehicle under five years old or a brand new vehicle? This will ultimately depend on the vehicle and the requirements of the licensing authority to some extent.

An insurer must consider the value of the vehicle and how old it is – for example, it could be slightly older than five years or much older.

Under existing case law, the claimant is entitled to be put back into the position they were in prior to the accident. Nevertheless, the standard of a newer vehicle is undoubtedly betterment. What the claimant has lost (during the period when the vehicle is unavailable) is the ability to earn a living.

These claims can be low frequency but very high severity in terms of the outlay. Ending the hire arrangement as soon as possible with a general interim payment, will help reduce costs. If the claimant chooses to use the interim payment to replace the vehicle, the insurer can then offset that against the hire charges at a later date.

How do insurers utilise green parts?

Until more recently, new for old has been the long-established position for insurers and an understandable expectation of policy holders with regard to replacement parts in vehicle repairs. However, we are starting to see a shift towards greater use and acceptance of green parts. There are now insurers that are writing green parts in to their policies – such parts warrantied and having gone through all of the pre-requisite safety and quality standard checks.

There is certainly a place for green parts, particularly in providing a good solution in the context of a temporary replacement/repair to reduce hire periods. The world of temporary repairs is a good place to start. For example, where the vehicle is otherwise undamaged but damage to a wing mirror has rendered the vehicle unusable.

Read other items in Personal Injury Brief – July 2023

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