The Centre for Economics and Business Research ("CEBR") are currently conducting an Independent Rate Review ("IRR") on behalf of the GTA Technical Committee in order, I guess, to provide more certainty around the determination of a GTA rate which is lower than the Basic Hire Rate which might be achievable in litigation.
I am told that, as part of those discussions, CEBR are keen to understand the frequency of GTA claims where the customer is considered to be impecunious.
I recall, having negotiated around a dozen annual GTA rate reviews over the years, that one of our stronger points was that the GTA rate did not properly identify the frequency of impecunious claimants and so applying any annual rate increase had to recognise that we were conceding a significant potential margin on those claims by agreeing to settle impecunious claims at the GTA rate. Our argument historically was that there was a reasonable prospect of that element of the mix being high.
Insurers would try to balance that proposition with an argument about the time value of money and the prospect of early settlement and certainty in the GTA.
We were never able to provide an empirical calculation of the volume of impecunious claimants in the total mix and it would have been unhelpful to our members if we did. Whilst the position may have worked in or favour, the real obstacle was that it was impossible for the experience of one CHO to match the experience of others, even if the data was faithfully, honestly and openly shared.
Aside from how many claims were handled by each CHO, and from where they were sourced, there was the issue of how many impecunious claimants were identified by whether they drove a prestige or mainstream car or a motor bike, or whether the claim was for a taxi versus a standard car or a young driver or student compared with a middle aged company car driver or even now, someone on furlough and at risk of being made redundant or someone currently employed or unemployed. So many different permutations before you even got to personal financial means and those permutations applied in different ratios across so many different CHOs, and all conspiring to complicate the picture as does the current, historic or future economic environment.
I note that Douglas McWilliams, deputy chairman of CEBR, gave an interview to the BBC in March 2020 and forecast that "this will be the worst economic crisis since the 1930s."
Mr McWilliams made two particular points about the economic prospects for consumers. He said:
" 1) We will definitely be in recession – the only issue is how deep; and
2) Is now a good time to buy a house ?– sadly, at the risk of adding to gloom and doom, not really."
A year later, the contraction in the UK economy has been the worst in Europe and more than 1.5 million people remain furloughed.
I mention this comment in the context of a future rate review because I am aware that CEBR have asked GTA subscribers for details of their mix as regard impecunious versus non impecunious claimants, presumably to determine some kind of discount or uplift in the calculation for the volume of impecunious claims settled within the GTA and its effective impact on rate.
This is not a new challenge. Aside from it having impacted every GTA rate review since the turn of the century, I recall this same issue being debated during the CMA investigation, with the same information being sought and not provided and conclusions eventually being reached by the CMA that
"the test for impecuniosity does not appear to be clear and, with the exception of WNS Assistance, the CMCs/CHCs on our sample do not appear to assess whether a driver requires a replacement car on credit terms"
"we note that the electronic call records provided by the ten motor insurers and the nine CMCs/CHCs in our samples enabled us to assess the type of replacement car provided to the driver, but not the driver’s need for a replacement car or the driver’s need for a replacement car on credit. We note that an assessment of the driver’s need for a replacement car might have been carried out at a later stage in the process. Also, by focusing only on records where a replacement car was provided, we have not captured those cases where there was an assessment of the driver’s need, which resulted in a replacement car not being provided.
A non-fault driver can only claim the costs of credit associated with a credit hire if they can demonstrate that it was reasonable in the circumstances to hire the replacement car on credit (ie the driver is impecunious). However, the assessment of what the tort law entitlement requires in a given case will be informed by the specific facts of that case, which, in view of the nature of the ‘impecuniosity test’, may lead to some practical difficulties for CMCs/CHCS in assessing whether the driver requires a replacement car on credit."
All this for context really and recognising that working in the credit hire sector often feels like Groundhog Day and yet most of us who were engaged with the CMA in addressing, and with a memory of these issues (myself, David Sandhu, Martin Andrews, Steve Turner and Sean Ellison), are no longer engaged in the sector whilst Alan Gilbert and Martin Ward (Auxillis) no longer subscribe to the GTA.