By Ron Arnold, founder 11eight

Australian motor insurers face a growing challenge from credit hire companies, which provide replacement vehicles to drivers involved in no-fault accidents, with costs recovered from the at-fault party’s insurer.

Credit hire companies (CHCs) sometimes work with accident management companies (AMCs), which organise repairs, and both may have links to legal and debt recovery services.

These services offer convenience by keeping consumers mobile after not-at-fault accidents, handling repairs and facilitating interactions with insurers.

However, they increase overall insurance costs and may lead to unexpected outcomes for consumers – for example, legal proceedings initiated in customers’ names without their knowledge, and customers being pursued for money after unsuccessful recovery attempts, with vehicles sometimes held ransom until payments are made.

The UK experience: a warning from across the globe

While the footprint in Australia is smaller than in the UK, the trajectory and risks are strikingly similar, and the UK experience offers critical lessons.

In the UK, credit hire has become a well-established feature of the insurance landscape. The level of credit hire activity is amplified by the puzzling practice of some insurers, which refer not-at-fault claims to CHCs.  

CHCs in the UK are not directly regulated by the Financial Conduct Authority or covered by the Financial Ombudsman Service, but there are calls for government regulation.

A voluntary agreement, known as the General Terms of Agreement, operates in the industry and guides conduct between many of the UK’s major motor insurers and some CHCs. It outlines procedures for defining hire rates, required documentation, hire periods and claim settlement timelines. 

The General Terms of Agreement aim to minimise friction between parties, avoid unnecessary litigation and provide more cost certainty. Many believe it has helped reduce disputes over rates, speed claim resolution and achieve greater transparency and fairness for not-at-fault drivers. Being voluntary, not all market players follow the guidelines.  

Currently, the Association of British Insurers is looking to revamp the agreement by introducing compulsory arbitration, clearer rules, annual data-driven reviews of hire rates and revised penalties for late payments.

The scale and impact of CHC activities in the UK are significant:

• In 2020, law firm Keoghs estimated that more than 500,000 credit hire claims are made annually, a figure many commentators believe has remained steady since.  
• Some CHCs and AMCs are highly integrated into the motor supply chain. For example, Anexo reported having a network of about 1150 introducer garages across England and Wales, mainly small independents.
• A growing share of the market operates outside the General Terms of Agreement (GTA) and bilateral agreements, with non-GTA claims driving higher costs. The average credit hire invoice, GTA and non-GTA combined, has risen sharply over the past decade, from about £1105 in 2014 to £5249 ($10,759) last year. GTA rates have increased by 5.78% over 10 years, but non-GTA daily hire rates often exceed £200 ($410), with some cases reaching £999.99 ($2049).
• Annually, up to 100,000 credit hire disputes enter the UK legal system, according to the Law Society Gazette.

The Financial Ombudsman Service warns motorists unaware of the risks associated with credit hire could face bills of tens of thousands of pounds.

Rachel Lam, ombudsman director at FOS, said: “Consumers and insurers can be subject to huge costs when credit hire is used. People have told us they would never knowingly have chosen credit hire had they known the risks of having to pay the costs involved themselves.

“Others believed they were still dealing with their insurer, and it wasn’t made clear to them that they’d been passed to a credit hire provider in the first place. We would urge industry to take an approach which is balanced, fair and transparent.”

Addressing the rising challenge in Australia

CHCs and AMCs are not new to the Australian market. When I joined AAMI in the mid-1990s, these businesses were active. The insurance industry had a solid grasp of their business models, and the actions of individual insurers largely kept their influence and costs in check.

Today, the landscape is very different. CHC and AMC activity has increased considerably, and market dynamics now present far greater challenges for insurers, consumers and regulators alike.

The Insurance Council of Australia’s recent report, Motor Insurance Policy Paper – A Roadmap for Reducing Rising Premiums, reports some important dynamics and insights: 

• Rapid growth: claims involving CHCs/AMCs rose by 400% from 2019 to 2022. 
• Much higher costs: the average credit hire claim is three times higher than a standard rental or replacement vehicle claim, inflating insurer costs and policyholder premiums.
• High-pressure tactics: some CHCs/AMCs use high-pressure recovery tactics, including settlement demands above market rates, short insurer response times, and frequent legal threats, increasing litigation risk and costs.
• Regulatory gaps: CHCs/AMCs mostly operate outside financial regulations and dispute schemes such as the Australian Financial Complaints Authority, exposing consumers to questionable practices and leaving insurers few options besides court challenges.

Imperatives for Australian insurers

The stakes are high. Without action, credit hire and accident management could become a systemic cost driver, raising premiums and exposing consumers to risks. ICA has called for reform, including stricter regulation and consumer protections. But insurers also need to act decisively:

• Early intervention: quickly contact not-at-fault drivers, offer courtesy cars, repair networks and guarantees, and explore technology as an enabler.  
• Dedicated teams: form multidisciplinary teams skilled in claims, analytics, legal and fraud, with deep knowledge of CHC/AMC networks.
• Leverage analytics: use advanced analytics and AI to assess claims, identify anomalies and challenge inappropriate claims.
• Litigation and contracts: track legal decisions and contract terms; contest unreasonable rates, durations and inappropriate provisions.
• Provider management: strengthen trusted repair and rental networks for better outcomes.
• Consumer communication: educate policyholders about risks and rights at claim time.
• Work with consumer advocates: collaborate with advocates to assist policyholders facing credit hire debts, develop educational resources, share risk data and support reform efforts.

Beyond these actions, and more fundamentally, insurers must look at their policy coverage, claims processes and pricing models to reduce the attractiveness and opportunity for CHC and AMC services:

• Provide mobility options: insurers should explore providing “no-cost” vehicles to not-at-fault claimants.
• Improve claims process: vehicle repair times have risen from 39 days in 2019 to more than 61 days in 2024.
• Reconsider premium loading: some insurers increase premiums after not-at-fault claims, “encouraging” consumers to seek CHC and AMC services instead of relying on their insurer.

Is there a role for a voluntary code for credit hire, like in the UK?

Implementing a voluntary code for credit hire presents a complex challenge, with potential benefits but significant risks.

A code could provide clarity and consistency to credit hire arrangements, with agreed frameworks for daily hire rates and standardised practices. This could make credit hire more transparent and reduce disputes for insurers, consumers and providers.

However, formalising credit hire through a voluntary code could legitimise and expand the sector, increasing claim volumes.

It could also reduce pressure on regulators to implement stronger reforms, delaying needed legal protections. Since compliance is voluntary, some companies may ignore the code, limiting its effectiveness.

The way forward

The UK’s credit hire saga offers a cautionary tale of cost inflation, consumer risks and litigation overload.

By learning from this experience and adopting proactive, data-driven and decisive strategies, Australian insurers can deliver better services, support consumers and provide more affordable motor insurance.

Beyond the need to improve the regulatory settings, insurers’ actions will determine whether credit hire and accident companies become a mainstream feature of Australian motor insurance.

Ultimately, quality repair processes, fast repair times and the ability to solve the mobility challenge for motorists without a car because of an accident will be insurers’ best defences.

After a successful executive career in government and insurance, Ron Arnold founded 11eight to help organisations solve complex challenges and drive long-term success by delivering transformative strategies.