It’s no surprise UK motorists are growing increasingly exasperated. They are raising their voices in opposition to what they describe as exorbitant fees for low-speed collisions. Recent cases submitted to a prominent publication reveal shocking claims that have left many questioning the integrity of accident management practices. Inspiration Readers BB, LD read along with Short Reads writer Keith Barry. They shared stories that showed how inflated repair costs and hire car fees can be absurdly exaggerated.
One eye popping example is for a hire car charged at an incredible £128 / day. After 35 days these costs shot up to a jaw dropping £4,506. Almost two years after the original incident, this transparency claim made it to court for the first time. This illustrates just how long and involved the process is required to be when contesting such charges. Whenever personal injuries are involved, they can often triple or quadruple claims into the tens of millions. This explosion makes financial recovery at best untenable and at worst impossible for most accident victims.
The Cost of Replacement Vehicles
Accident management companies have emerged as major players in this shady underbelly of the towing business. When engaged, they typically bill in excess of £5,000 to deliver substitute cars for incident victims. These companies provide rental cars at prices that soon escalate to £600 per day. This leads to extended repair times and subsequently higher hire charges. Such practices have led to a public outcry from drivers who believe that they’re being taken advantage of when they’re at their most vulnerable.
This one reader’s experience should serve as a cautionary tale. After their car was declared a total loss, they were left with a net bill of £10,300—over three times the market value of the vehicle. This situation ought to lead us to wonder what is fueling the excessive claims. It spotlights how accident management companies help inflate expenses.
“The owner had been quoted £200 from a local garage to fully repair it, but their insurer’s claims management company took it upon themselves to remedy the claim providing a replacement car while the repairs were carried out at a massively inflated amount. A brand new bumper with the same factory colour for the car in question was about £300 with a fitting time of less than an hour. It felt like a massive scam,” – BH.
Retail Motor insurance premiums are up 33% in the last year, with the median premium now standing at £635. This drastic national change has exacerbated an already awful landscape. The Association of British Insurers (ABI) today revealed that insurers’ claims bills have more than doubled since 1999. By comparison, they only increased by 8% over that same period, to an all-time high of £4,800 on average. This discrepancy highlights a troubling trend where insurers are struggling to manage rising costs while maintaining affordable premiums for consumers.
The Strain on Insurers
2023 proved to be a catastrophic year for these motor insurers as they continued to eat the cost. A recent analysis by EY shows a surprising trend. Insurers are now paying out £1.14 in claims and expenses for every £1 they collect in premiums. As our analysis of the motor insurance market reveals, premiums have increased in real terms by only 1.3% since 2017. At the same time, the average cost of claims has surged 23%.
“Since the previous peak at the end of 2017, motor insurance premiums have increased 1.3%, in real terms, whereas claims costs have risen by 23% in the same time period. 2023 was a difficult year for motor insurers as they continue to absorb cost rises,” – The Association of British Insurers.
The ABI remains committed to bringing awareness to these issues. In response, they have released a roadmap that lists concrete actions to address spiraling insurance costs that industry actors, state governments, and regulators can take or do better.
A Frustrating Experience for Drivers
We’ve heard many motorists’ heartbreaking stories as they try to find their way through the claims process. Reader JD recently told about how on a no-fault claim he was immediately transferred to an accident management firm. All museum visitors—even those who don’t live locally—are required to pre-reserve timed tickets to enter. The high interest rates forced him to accept one regardless.
“When I recently made a no-fault claim, I was passed directly to an accident management company, rather than the insurer. They insisted I take out a hire car even though I told them I didn’t need one. The hire car rates were exorbitant and I didn’t want to end up paying them if the other party’s insurer refused to pay,” – Reader JD.
This frustration echoes that of fellow drivers who have faced similar bureaucratic obstacles and escalated expenses during their entire claims journeys. Others have found themselves forced to challenge charges just to receive a small discount. Reader KW offered a great example about how going through an insurer made things more complicated. The other party’s insurers disputed the claim, leading to litigation nearly two years later.
“Unsurprisingly the other party’s insurers contested the claim and it all ended up going to court around two years later. Luckily I had signed an indemnity but it all felt like some sort of game between the insurers and clearly it was a good earner for all involved,” – KW.
In addition to reimbursement for vehicle repair and replacement vehicles, claims may extend to personal injury and property damage payments. The ABI spokesperson was quick to note that personal injuries are usually the largest single component of a claim. These injuries can add up quickly into tens of millions.
“Beyond repairs, claims may also include payments to others involved in the incident or any damage to property. The largest element of a claim can be for personal injuries – which could run into the tens of millions,” – Association of British Insurers spokesperson.