Written evidence from the Ford Motor Company
FORD ACCIDENT MANAGEMENT:
A BLUEPRINT FOR CLAIMS MANAGEMENT
WITHOUT PERSONAL INJURY REFERRAL FEES OR CREDIT HIRE
Ford Motor Company welcomes the findings of the House
of Commons Transport Committee report in to the cost of motor
insurance. It is not in Ford's interests to see car owners priced
out of the insurance market. Nor is it in anyone's interest to
see an increase in uninsured driving. Ford has therefore developed
a new working model to address the causes of rising insurance
premiums.
THE CURRENT
ACCIDENT MANAGEMENT
(AM) SECTOR BUSINESS
MODEL
— Revenue
is taken in the form of personal injury (PI) referral fees. Firms
of solicitors pay these fees in exchange for details of "non
fault" drivers. As PI referral fees are so lucrative motorists
are encouraged to make PI claims, asked repeatedly if they have
suffered bodily injury and advised of typical compensation payments
that they might receive.[1]
— Credit
hire revenue: insurers are charged General Terms of Agreement
(GTA) rental rates which are far higher than the actual cost of
providing hire vehicles.
— It
is financially beneficial to AM companies if repairs take longer
than necessary, extending the duration of this credit hire.
All these elements represent significant sources
of insurance premium inflation:
— Fees
charged to repairers: accident repair centres pay the claims management
companies an admin fee for repairs they carry out.
FORD'S
NEW ETHICAL
MODEL FOR
ACCIDENT MANAGEMENT
Ford Motor Company has launched the Ford Accident
Management programme free of charge for the owners of new
and used Ford vehicles, enabling the following advantages:
— No
personal injury (PI) "ambulance chasing". Customers
are not induced to make personal injury claims. Neither Ford nor
its partners make any money from PI referral fees.
— No
credit hire. No credit agreement for customers to sign (the current
business model sees customers underwriting the cost of hire vehicles).[2]
— A hire
vehicle is provided to drivers needing transport. For "at
fault" drivers a Ford courtesy car is provided, for "non
fault" drivers a hire car, appropriate to their needs,
is provided (by Ford Rental where possible).
— The
Ford model charges insurers the cost of providing rental vehicles
(for "at fault" drivers) plus a small admin fee. Courtesy
cars are not charged to insurers.
— An
admin charge is paid by repairers to Ford's call centre partners.
This fee covers the cost of the call centre/ claims handling process.
SUMMARY
— Ford's
model cuts out PI referral fees and excess hire vehicle charges.
— All
customer calls to the call centre are screened for potential fraud.[3]
— The
model does not prevent drivers from seeking bodily injury compensation
following a road traffic incident, however it does not induce
spurious claims to be made and there are no PI fees which would
be passed on to insurers. Customers who express a wish to make
a PI claim, unprompted, could be referred to mediation, reducing
the cost of the claim.
Only 24% of the cost of a motor insurance claim is
the cost of repairing the vehicles involved. By substantially
reducing the remaining 76% of costs driven mainly by PI referral
fees and credit hire charges the costs to insurance companies
will be substantially reduced. The UK motor insurance market is
very competitive, with a reduced cost base insurers will have
to compete on price to win new business.
NOTES
[1] Department of Transport statistics report a 10%
fall in the number of road traffic accidents involving personal
injury over the past three years, yet personal injury claims on
motor insurance policies have increased by 43% over the same period.
Association of Bodyshop Professionals (ABP) 3/8/11.
Compensation claims for the neck injury now stand
at 76% of all personal injury claims as a result of a car accident,
and the insurance industry is convinced that many are fraudulent.
"76% is twice the average for other European countries,"
says a spokesman for the Association of British Insurers (ABI).
"It's unlikely we've got some of the weakest necks in Europe."
2/8/11 Daily Telegraph.
[2] Credit hire: customers sign credit agreements
when they are put in to a hire vehicle by claims managers. If
insurance companies dispute the amount of hire the customer is
liable for the debt. There have been high profile cases where
customers have had to appear in court to explain the charges,
eg the footballer Darren Bent vs. Allianz Insurance dispute over
a £63,000 hire car bill. It has been argued that customers
are not fully aware of their liability when they sign agreements
to take hire cars.
[3] Car insurance companies end up paying out an
extra £2 billion in costs every year due to fraudulent claims.
This means that for the honest policyholder in the UK, their car
insurance rates go up by an average of £44 every year (ABI).
August 2011
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