Insurers and credit hire organisations need to work together to create a new general terms of agreement to better reflect today’s engines. That is the view of Europcar UK business development director James Roberts, who adds all parties will benefit if a gap can be bridged between the Association of British Insurers and today’s motoring technology.
Once upon a time in the world of motoring, bigger was better.
A vehicle’s power was measured by the number of litres it pushed around under the bonnet. But we now live in different times. Motorists still want power, but they also clamour for fuel economy. And the regulatory focus on vehicle emissions is sharper than ever.
The car makers are responding. Motor manufacturers are squeezing more power out of smaller engines, using a combination of turbochargers, improved lubrication and components, in combination with advances in software technology within a car’s management system.
In fact, some one-litre, three-cylinder vehicles deliver more power than their four-cylinder counterparts of generations gone by. Competition is coming from elsewhere too, with the electric vehicle market promising a greener, more economical future.
The rental industry is already embracing the new style of smaller, turbocharged engines, which achieve the same brake horsepower as larger engines. However, it’s a different story, when it comes to replacement vehicle hire for the insurance industry.
Behind the times
The Association of British Insurers’ third party hire vehicle categorisation is based on chassis and engine size, rather than power output and this is making the categories outmoded in the age of the smaller, powerful engines of today. The ABI third party hire framework generally applies a higher rate to vehicles with a larger engine size.
Once upon a time, this principle made sense, because the larger the engine and the vehicle, the more expensive the vehicle would be. But fast forward to today and is a much better barometer than engine size. For instance, Ford’s Eco Boost range offers a one-litre three-cylinder vehicle that delivers more power than a 1.8-litre, four-cylinder engine of the previous generation.
It is clear that the ABI third party hire framework is evolving, as many standard hire groups now reference variable engine sizes. To many in the sector, that is progress but for others there is still a high degree of uncertainty.
In particular, many credit hire organisations are unsure what the general terms of agreement group to bill the ‘at-fault’ insurer. And this takes them into the world of dispute.
There can be friction when it comes to agreeing claims costs as well as potentially unnecessary litigation if the credit hire organisation and insurer reach stalemate. And that’s without even taking into account the fact that, at the heart of the dispute, sits the customer who has been involved in a motor accident and could really do without further disruption.
Time for change
It seems that the ABI categorisation is out of step with the technology currently driving the motor industry. Debate therefore needs to take place between its subscribing members – including the insurers and the credit hire organisations - to encourage change and, ideally create a new rating system that reflects today’s engines.
Using BHP as a guide makes far more sense than relying on engine size. Especially as the electric motoring revolution steps up a pace. Admittedly the numbers are currently pretty small – but as government initiatives to improve the charging infrastructure really take hold, the current minimal take up of electric vehicles should be accelerated rapidly.
Understandably, however, a complete overhaul may be seen as too much too soon, but that doesn’t have to mean an end to the discussion. With a little bit of turbocharging to the industry’s engine, it should be possible for the gap between the ABI and today’s motoring technology to be bridged for the benefit of all parties.