As the General Terms of Agreement faces review, insurers have called for the agreement to be made mandatory.
A global chip shortage is impacting wait times for new cars and claims costs have already been impacted by the increased duration of the repair lifecycle, due to issues around availability of the parts, according to James Driscoll, claims manager at Aviva.
He explained: “This is due to a combination of factors including supply chain shortages and disruption, economic pressures as a result of the Covid pandemic and further disruption from world events.”
A review of the General Terms of Agreement, the agreement between insurers and motor repairers, is currently underway and is it is expected that supply chain delays, parts shortages, and inflation as well as skills requirements will be taken into the account.
A spokesperson for Direct Line Group, said: “We believe the GTA should be mandatory for credit hire operations and would welcome further collaboration with CHOs to ensure the current GTA vehicle grouping process is fit for the future. Anything we can do to drive down repair cycle times would be a benefit not only for customers but also the industry.”
Driscoll explained that Aviva is already collaborating with credit hire companies “within the spirit of the GTA” and working “with an independent rate reviewer to agree the fair maximum daily rate for a hire vehicle” to reflect the current economy.
He added that it would be “great to have the entire industry working to the same, agreed standard”.
And according to Waseem Malik, chief claims officer at Aviva, “there’s talk of, do we make the GTA protocols more compulsory, rather than it being voluntary”.
While the GTA “reduces friction and helps settle credit hire claims swiftly”, Nick Kelsall, head of motor claims at Allianz pointed out that it does not always work as the industry as a whole is facing huge difficulties”.
He added that challenges facing the motor repair sector “won’t be fixed simply by mandating the GTA”.
He said: “We much prefer imaginative solutions involving the whole sector, with credit hire companies, insurers, salvage experts and repairers working together to provide excellent service to our mutual customers and build a sustainable future for the sector.
Cooperation between insurers and credit hire companies helps to “reduce friction and focus on customers who require mobility solution”, according to Kirsty McKno, managing director at Cogent Hire.
She said: “Our industry is weathering a perfect storm in respect of issues such as parts, vehicle supply, energy costs, resource and skill set and, if we are to prevent extended costs and hire periods, collaboration is now more vital than ever.”
McKno pointed out that Cogent Hire “chosen not to” subscribe to the GTA. She said: “Our vision is to lead a rethink in the way that we interact with one another. That includes working to introduce solutions such as green parts, and repair not replace, and building an understanding of the role of both technology and people that is key to future proofing the industry. “Educating ourselves about the risks and how to safely avoid them within the electric vehicle supply chain is vital.”
Peter Gomes, interim CEO of Credit Hire Organisations, pointed out constraints on supply chain have led to reduced volumes into the fleet sector, which led to increased lead times and higher prices.
He explained: “Private sales are down 139,00 per annum from 978,000 to 839,000, a reduction of just 14%, whereas fleet sales are down by 509,000 from 1.22 million, a reduction of 42%.
In short you cannot reduce supply into the fleet sector by over half a million vehicles per annum and not expect this to result in significant (upward) movement in daily rental rates.
“Second, the shortages of parts and people have led to reduced repair capacity and longer lead time and higher prices for parts “As a result, daily rental businesses have reduced their capacity into the credit hire market and in some cases withdrawn altogether, to the detriment of non-fault motorists needing mobility.”
Gomes added that the industry task is to work together to make the GTA work “sufficiently so that players in the market, insurer and credit hire companies, see the attraction of subscribing to the GTA and its associated protocols”.
He said: “With cross industry support it will continue to act as an effective example of self-regulation with no need for a mandatory approach, which is likely to require legislation. “Moreover, those players continuing to sit outside the GTA and its associated protocols tend to follow more litigious models which we don’t believe is in the long term interests of customers. Reducing friction is in the interests of all stakeholders.”