COVID-19: mitigating against repair delays and extended credit hire periods in RTA claims

Whilst the full extent of the impact of COVID-19 on the motor industry is not yet known, we are already seeing a number of impacts on the market. Here we consider the impact on vehicle repair and credit hire periods in road traffic accident claims, and the potential steps that can be taken to mitigate against the issues that are arising.

Repair periods

The closure and shutdown of factories throughout China following the COVID-19 outbreak has resulted in a significant drop in production of motor parts which is already being felt across the global supply chain.

Whilst factories in China have reopened, it is likely to take at least several months before production returns to peak performance level and the supply of parts returns to normal levels.

The drop in production is likely to have a significant impact on the availability of parts for repairs. Together with staff shortages and business closures, we are likely to see a significant increase in the average repair period for the foreseeable future until normal supply resumes. We are likely to be looking at significantly longer repair periods even for straight-forward and low value repairs.

Mitigating against extended vehicle repair periods

Intervention/third party capture

One option for insurers, may be to ‘take control’ of repairs in order to ensure that these are processed as quickly as possible and there are no additional delays being caused unnecessarily. Intervention and third party capture means that insurers would be directly involved and kept up-to-date in relation to the repair process, rather than leaving this in the hands of third party insurers, repairers or credit hire organisations.

Use of dedicated or preferred repair network

Use of own dedicated or preferred repair networks may also add a measure of control to the repair process and enable priority repairs to be dealt with more quickly (e.g. by directing these to specific repairers based upon known capacity). This may assist in prioritising key repairs (for example where there are ongoing prestige credit hire claims) and retaining some level of monitoring and control. Furthermore use of preferred repairers would add a level of confidence and trust in respect of the repair period.

Use of approved repairers/‘main dealers’

Insistence upon the use of approved repairers or ‘main dealers’ may be another consideration. Whilst repairs through a main dealer would usually be more expensive due to higher labour costs, larger companies with more weight in the market may have better access to the availability of parts, with any increased costs potentially mitigated by shorter repair periods.

Use of total loss/cash in lieu payments

Commercial consideration of total loss payments/cash in lieu offers may also be an option where these are considered economically viable. It may be preferable in some cases to deal with vehicles as an economic total loss even if they have been assessed as being economically repairable (although borderline), in order to avoid the inherent delay in availability of parts and the associated backlog in repairs.

Credit hire

Self-isolation and social distancing measures currently mean less call for credit hire. Once the social isolation restrictions are eased or lifted entirely, it is likely the number of credit hire claims will return to usual levels as we return to previous levels of road use.

The supply chain impact on parts referenced above could, even if hire periods were extended by even two weeks, cost insurers significant sums. The focus should therefore be on mitigating delays, where possible, and promoting early resolution of hire claims where reasonable.

It will be interesting to see how the credit hire industry responds to the current crisis. We may see a more robust approach to negotiation and litigation, depending on the individual credit hire organisation’s (CHO) position, as they attempt to recoup lost revenue from these quieter months. Alternatively, the focus may be on cash flow and potential volume agreements.

Mitigating against extended credit hire periods

Cash flow practicalities/commercial settlements

CHOs will be keen to keep cash flow coming in during quieter months and subject to any furlough implications may have staff available to enter detailed discussions.

Basic Hire Rates evidence remains available

Basic Hire Rates (BHR) surveyors are still operating remotely and this is a good opportunity to obtain BHR evidence to challenge rates. However, bear in mind that the difficulties and delays with litigation and court hearings may mean that any highly contentious rates arguments may be incapable of resolution for a significant length of time.

Robust intervention offers

As always, it is advisable to make robust intervention offers, where possible, or offers based upon intervention rates where claimants are already in hire, if there is the facility to do so.

Bilateral agreements

The combination of factors outlined above may lead insurers and CHO’s to the table where bilateral agreements may be struck.


Social isolation measures mean fewer vehicles on the roads, which in turn has meant significantly fewer accidents and new claims. However, we will inevitably see a spike in claims as restrictions are relaxed, encompassing both new claims and claims which have stalled in the backlog.

A number of insurers have agreed a litigation standstill agreement in relation to subrogated recovery claims in particular. However, on a cautionary note, the volume of claims is still there and steps should be taken to resolve these, where possible, during this quieter period. This will be essential to mitigate against the difficulties arising from a large volume of claims landing at once, together with an influx of new claims, once the situation returns to normal.

As a general rule, whilst the option is of course available, generic agreements pose increased uncertainty and potential risk, and any standstill agreements should be considered on a case-by-case basis.

The current situation presents a number of potential obstacles in terms of delay and prompt resolution of contentious issues. However, the significant drop in the number of new claims may afford some opportunity to capitalise on any spare resource in an effort to ‘clear the decks’ for the inevitable upsurge of work when the lockdown restrictions are lifted and the industry begins to return to normal.

Read others items in Motor Brief - June 2020

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