Insurance Post

Seeing double


It has been claimed overlapping during vehicle hire could be costing the insurance industry millions of pounds. Edward Murray investigates the how much of an issue this really is.

The power to be in two places at once is normally reserved for super heroes and celestial beings, but it appears credit hire vehicles have also cracked the secret of simultaneously appearing in multiple locations. The physics behind how they have done this remains a mystery, but a new IT system launched last month by claims analyst Validus, has found what it believes is significant evidence of the phenomenon.

Indeed, the firm suggests that the same credit hire vehicle turning up in different claims, but over the same period of time, is costing insurers millions of pounds and can be quickly and easily identified through its Ask Ludo software.

Where this overlapping exists, insurers will be keen to flush it out, although evidence is far from conclusive that the practice is prolific or indeed represents a major threat to them when compared to some of the other issues that they are currently dealing with.

For their own part, credit hire operators are understandably dubious that overlapping is a significant issue and it is certainly not one they feel the major firms in the sector are guilty of. So, just how does this new system work, how serious is the overlapping problem and how far does the IT go in addressing fraud issues in the credit hire market more generally?

Ask Ludo is essentially a cross-referencing service. Insurers submit data on credit hire claims and the technology goes to work to see if vehicles have been used in multiple claims over the same period of time. Where matches are found this raises obvious questions about the validity of the claims involved.

The software uses data including claims reference numbers, names, registration numbers and — most importantly — the start and end dates of the hire. Ed Van Rooyen, Validus legal services director, says about 1% of the 80 000 credit hire claims investigated so far have contained overlapping issues worthy of further attention.

He believes this number will rise as more insurers submit data to the system, improving its chances of matching any potential cases of overlapping.

Currently, Validus is working with seven insurers that have directly subscribed to the service and it is also putting credit hire claims from a further six carriers that it works with through the system. There is no cost for insurers to submit data, and fees are only raised where an insurer would like to see all of the pertinent information relating to a particular overlapping incident that has been identified. The information costs insurers £1 for every day of overlap contained in the claim.

Potential problems
If 1% of all credit hire claims carry potential problems with overlapping, then clearly there is an issue that needs to be dealt with and there are significant savings for insurers to benefit from. However, verifying the scale of the situation remains the issue.

Gareth Berry, sales director at Easi-Drive, knows the credit hire industry is not without its problems and he says: "There are some unscrupulous companies out there, so the more easily they can be identified and removed the better."

However, he is equally and unsurprisingly quick to vouch for the credentials of others in the sector: "While I am aware that overlapping exists, as a reputable credit hire organisation we do not come across it, as this is one element of the claim we do have full control over."

Steve Evans, chief executive of Accident Exchange Group, is even less convinced that vehicle overlapping is an issue worth getting into a lather about and for all of the issues dealt with by the credit hire industry over the years, he says this has simply never been a concern.

"Vehicle overlapping is not a problem so far as I've heard," he says. "I sit on the technical committee for the general terms of agreement. I do not think we have spoken about this at all in the past nine years and so I do not think it is a major issue."

Around 80% of credit hire business is represented by two trade bodies — the Accident Management Association and the National Association of Credit Hire Operators, who are presently seeking to combine in a merger — representing more than 60 firms between them. These bodies have done a lot of work to set standards in the industry and Mr Evans is forthright in stating: "I would not expect any of those firms to be guilty of anything that Validus is aiming to stamp out here."

However, like Mr Berry, he is not unaware of the faults in the credit hire industry and he adds: "You do have credit hire companies that are not that straight themselves and this is maybe where Validus is coming from. You have small companies that set up from a mobile phone number today and disappear in a couple of weeks once they have done what they wanted to do."

The question then is whether or not these businesses are capable of generating the sort of volumes that would lead to a detection rate of 1% in the claims that Validus has so far looked at. In truth, Mr Evans believes the vast majority of any overlapping that does creep into proceedings is entirely legitimate.

He cites the example of a credit hire vehicle that is returned at 9am before being rented out again at 3pm the same day. Immediately this will mean the vehicle is logged against two claims on the same day. Problem solved? Well, not quite. Mr Van Rooyen says Validus has taken this into account and it is only where overlapping occurs for a period of at least two days that claims are flagged up for further investigation.

Tit-for-tat debate
In what is something of a tit-for-tat debate, Tony Baker, director general of the Accident Management Association, believes Ask Ludo came about because Validus had found evidence of single day overlapping, before realising it was entirely legitimate and he says: "They have spent time and effort dreaming this up and they have now found they have egg on their face because there is no evidence at all that I have seen of any problem with overlapping."

Mr Baker adds: "Validus is trying to sell something on a very spurious basis and drive a wedge between insurers and CHOs in order to profit." He feels that where fraud occurs, CHOs are just as liable as insurers to lose out and this is a point of view that Mr Berry is quick to back up: "Credit hire and credit repair companies are themselves victims of fraudulent claims. Should a claim be fraudulent then not only are we unable to recover the cost of the replacement vehicle and the repairs to that vehicle but, on occasion, the replacement vehicle may be used to stage a further accident." In turn he says this results in damage to vehicles and further claims against credit hire firms, while leaving them open to the threat of replacement vehicles being stolen.

Insurers are unlikely to feel much sympathy for the plight of CHOs and many of the issues that have caused contention between the two parties were recently discussed at length in an industry roundtable hosted by Post (

As such, insurers are likely to be interested in at least investigating the potential of overlapping, especially if it can be done cost effectively. David Williams, managing director of claims at Axa, says: "Overlapping is a problem, but whether or not it is a major problem we will need something like the Ask Ludo solution to tell us."

However, whether this or any other software that is developed to uncover overlapping becomes an ultimately indispensable tool for insurers, relies purely on the size of the data set it ends up controlling.

Mr Williams explains: "It is really going to be down to what solution gets most companies contributing their data to it because they could have the best system in the world with the best pricing in the world, but unless they have everybody putting their information into the system it's not going to be very good."

However, it is not just a question of whether the system can throw up cases of potential overlapping, but also one of just how easily insurers can supply the requisite data for examination. Insurers have long struggled with their legacy systems and extracting data for various purposes has proved difficult, expensive and often futile. Mr Williams is keenly aware of this issue and would certainly be loath to go through the IT assault course of isolating relevant claims data unless the work is going to deliver in spades.

As he says: "We find that on some of our older systems it is incredibly difficult to get any information out of them even for our own purposes. My thought would be that if we became involved and we started seeing some real benefit from using the system then we would look at how easily we could get the historic data out of our systems. But again, there is no point in just Axa submitting its data and you need to get a decent spread of the market, as you are only going to pick up overlaps with other companies if there is a good amount of data."

There are, therefore, a number of issues for insurers to overcome before they start investing time, effort and resource into using any technology to identify overlapping, even though the cost of using it is relatively cheap.

Indeed, insurers will also have to weigh up whether the sums involved in incidences of overlapping are worth chasing down and this will certainly be the case for historical claims where it is likely to be time consuming and expensive to find the parties concerned and re-examine the particulars of the case.

Understanding fraud
Mr Van Rooyen accepts that Ask Ludo is not without its limitations, but he insists it is another pebble in the pile of evidence that insurers need to understand fraudulent trends and combat them effectively. He says: "What has made people quite excited is the fact that there were many claims that have been highlighted that were under investigation for other things like personal injury and this added information that strengthens the case."

Certainly, fraud remains a massive issue that needs to be addressed by CHOs and insurers and until any solution has a critical mass of data it will be difficult to know just how serious the problem of overlapping is in the overall picture.

For Roger Bescoby, sales and marketing director at surveillance specialist Mike India 5, overlapping is not the major concern and he says there are more pressing problems relating to the need for the hire, the length of the hire and the type of vehicle involved in the hire.

Mr Bescoby says: "We have found that in excess of 90% of the cases we have gone out to have had at least one aspect on which we can go back to the credit hire company and challenge the bill."

It is this continued evidence of bloated, inaccurate and inappropriate claims that makes the relationship between insurers and CHOs so uneasy.

The only thing that will rid the relationship of mistrust is utter transparency, but sharing information on this sort of multi-party, cross industry basis is awash with commercial concerns and practical nightmares, and until these are dealt with, getting to the nub of the fraud problem will remain incredibly difficult.

How many insurers decide to Ask Ludo remains to be seen, however the software is a further window in the wall of transparency and the more light that can be poured on the relationships between insurers and credit hire operators, the better it will be for all interested parties.

Should insurers be concerned?
Click here for more on the 'overlapping debate'

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