Modern Insurance Magazine Issue 61

FEATURES
Establishing Duty
for Credit Hire
The new Consumer Duty came into force on 31st July 2023, bringing changes to how FCA regulated
businesses act for, and communicate with, their customers. The recent Europcar roundtable discussed this
issue and how it impacts the sector.
The entire industry – including insurers, CHOs
and vehicle replacement providers – has a
duty to ensure that their customers understand
the products and services being purchased. Of
course, reputable businesses should already have
their customers’ best interests at heart. These new
requirements should not cause a seismic shift in
customer service; however, all firms must review
their current practices, the clarity of wording
in their terms and conditions, and investigate
whether front of house sales teams clearly explain
these terms to their customers.
While credit hire organisations (CHOs) are not
regulated, the duty still applies to their activities as
part of the insurers’ supply chain. This is especially
important when a case originally categorised as
‘at fault’ later becomes known as ‘non-fault’. At
this stage, the CHO must make their involvement
clear to the customer, clarifying that the vehicle
is not a ‘courtesy car’, and they will be liable for
the cost.
The Financial Ombudsman Service has recently
confirmed that many of the complaints around
credit hire referral are not balanced, falling short
on giving policyholders enough information to
make an informed choice on whether or not to
use this service and its subsequent implications 1 .
As per the new Consumer Duty 2 guidelines, the
CHO must ‘provide timely and clear information
that people can understand about products and
services, so that consumers can make good
financial decisions’.
THE SOLE SUPPLY CONUNDRUM
To help customers make those ‘good financial
decisions’, businesses must provide a range of
suitable options from which they can choose.
However, sole supplier agreements make this
difficult to achieve in the insurance space. Insurers
working with only one CHO or replacement
vehicle partner are at risk of breaching their
Consumer Duty if there’s a perception that the
customer is not being offered the best choice for
their needs.
This is a conundrum for insurers. Many choose
sole supply for cost-effective and streamlined
supply chain management; however, being tied
into a contract with just one supplier could mean
that customers are not getting access to the most
appropriate and up to date solutions.
Plus, insurers are offering guaranteed hire car
products as part of an enhanced package. These
are based on the customer having access to their
choice of replacement vehicle for a fixed period,
or being able to specify automatic or electric
transmission. The replacement vehicle partner
must be able to match this customer expectation.
If they can’t, it risks an element of failure within the
supply chain.
Unfortunately, many insurers on sole supply
contracts have gone through three years of
difficulty, where they were forced to scrap likefor-like
vehicle replacement policies. Instead,
they have been obliged to offer any temporary
vehicle they could access. Moving away from
sole supply provides insurers with a contingency
against this, and promotes healthy competition
within the chain.
HEALTHY COMPETITION MEANS
DOING THINGS DIFFERENTLY
Insurers want to work with suppliers that can
remove friction from the claims process. This is
where a multi-partner supply chain can come into
its own.
New technology can help insurers deliver the
best outcomes for customers and enhance their
digital journey. Working with partners that have
the technology to automate certain parts of the
claims process, all without compromising the
customer experience, can help to reduce reliance
on headcount and ease pressure on resources.
Plus, working with a panel of suppliers who
recognise healthy competition, there’s an appetite
to do things differently and work collaboratively
for the best outcomes. For example, at Europcar
Mobility Group UK, we make it a priority to
meet with insurance providers, repairer networks
and key players in the industry in order to foster
innovation. This includes looking at where
improvements can be made, so the insurer can
remain focused on customer satisfaction and
retention.
The time has come for insurers to step away from
the false economy of sole supplier agreements
and build a network of partners that are
innovative, adaptable, and better placed to help
them reach their goals.
REGULATION FOR THE
UNREGULATED
The new regulations clearly state that all
financial services providers - including
organisations providing credit hire vehicles -
put consumer needs first.
As part of the insurance supply chain, CHOs
must adhere to the new guidance, reviewing
their current practices to evidence their
compliance and treat customers fairly.
Under the new duty, businesses are required to:
n Provide helpful and accessible customer
support. Don’t make people wait so long
for an answer that they give up!
n Provide timely and clear information that
customers can understand, in order to
make good financial decisions. Don’t
bury key information in lengthy terms and
conditions that few have time to read.
n Provide products and services that are
right for customers.
n Focus on the real and diverse needs of
customers, including those in vulnerable
circumstances, at every stage and in each
interaction.
James Roberts,
Business Development Director,
Insurance, Europcar Mobility Group UK
1
https://www.yourmoney.com/insurance/credit-hire-a-nasty-upselling-tactic-at-your-most-vulnerable-following-a-car-crash/
2
https://www.fca.org.uk/news/press-releases/fca-consumer-dutymajor-shift-financial-services
MODERN INSURANCE | 47