Spotlight: Better terms for the GTA?

 

Industry guidelines and protocols covering replacement vehicles and repairs haven’t always met with consensus from insurers and credit hire firms. So how will the new General Terms of Agreement fare? asks Saxon East

Last year marked the 30th anniversary of a pivotal moment in the credit hire industry.

In 1994, the House of Lords ruled in Giles v. Thompson that personal injury claimants could recover the costs of hiring replacement vehicles, legitimising the role of credit hire companies –though conflicts with insurers persisted.

Anthony Hughes, the current chief executive of the Credit Hire Organisation, working for insurers at the time, remembers the battleground well.

At-fault insurers were unhappy at being landed with perceived excessive charges for replacement vehicles, while credit hire firms felt they were offering good service to customers neglected by insurers.

He recalls: “I had thousands of cases in my cabinets. Insurers were employing specific law firms to target individual credit hire companies. It was a war of attrition.”

New era

Fast forward to today, and relationships have significantly improved. A revised General Terms of Agreement (GTA) – a voluntary protocol between credit hire companies and insurers to smooth out claims processes on replacement vehicles – was announced in November.

Could this signal a new era of efficiency, collaboration and better service for accident victims?

I had thousands of cases in my cabinets. Insurers were employing specific law firms to target individual credit hire companies. It was a war of attrition.

Anthony Hughes, the current chief executive of the Credit Hire Organisation

Before exploring the new-look GTA, it’s important to outline some of the challenges of the previous version.

The GTA was first launched in 2009, to reduce conflict and set out pre-agreed vehicle rates.

According to Leeann Chamberlain, technical and strategy lead at Verisk, the GTA has had identifiable pain points.

Chief among them were hire rates, hampered by a limited list of vehicles, and hire durations that were often open to interpretation.

Additionally, there was confusion around storage and recovery costs, as guidance on what constituted ‘reasonable expenses’ was lacking.

She says: “With frequency of storage on GTA claims increasing year-on-year, and up 133% in 2024 versus 2018, this is a growing area of contention.”

Market volatility

The challenges to the credit hire industry became more acute during Covid and the following years of motor inflation.

As post-pandemic restrictions lifted, the surge in vehicle demand strained suppliers, while supply chain issues and Brexit created difficulties in accessing vehicle parts, impacting hire durations and availability.

This, coupled with rising motor inflation, drove up vehicle hire costs.

James Driscoll, Aviva senior claims manager of motor damage and credit hire, and chair of the GTA insurer technical committee, noted there was ‘unprecedented volatility’ from late 2020 to 2023.

However, he shared optimism that data is returning to pre-Covid levels, meaning it is more settled and consistent, allowing for a more stable vehicle rate review process ahead.

Hughes believes the GTA was a stabilising influence during these years of turbulence.

“The GTA arguably played a big part in in containing claims inflation during Covid volatility, because, of course, the GTA rate didn’t actually change,” he says.

Nonetheless, a key lesson learned from this period is how the industry can address market volatility. 

GTA learnings

The revised GTA has made some big changes. There will be two independent data providers to help set vehicle rates.

Previously, rate reviews were completed ad hoc, data was not shared between sides, and rate alterations were agreed through negotiation.

Furthermore, the revised GTA will also ensure that unresolved cases within a specific timeframe proceed to compulsory arbitration.

Pete Highfield, third-party property damage claims manager at NFU Mutual and leader of the new GTA strategy board, explains: “Volatility in the markets has got to be a little bit easier to manage because friction has reduced, and the speed of recovery of funds [has improved]. I suspect that’s got to help with the management of fleets and being able to service the consumer.”

Chamberlain emphasises that while annual rate reviews should be standard, flexibility is vital during significant market changes like the pandemic.

But some remain sceptical about the GTA’s ability to manage volatility all together.

Former lawyer Jeff Winn, founder of accident management firm Winn Group, criticised the fixed caps and rigid terms of the GTA, believing it can expose insurers and credit hire firms to financial pressures and delayed resolutions.

His firm, which is not part of the GTA, prefers what they believe is more flexible protocol arrangements with individual insurers to adapt to changing market conditions.

However, he notes that better use of data could improve the guidelines.

“A GTA 2.0 that incorporates regular, data-driven reviews, similar to protocols, could better manage volatility and ensure customers receive timely and appropriate vehicles,” he says.

The data holy grail

The GTA will need high quality data to achieve the best outcomes for credit hire, insurers and customers.

Rather than vehicle by vehicle, we’re looking at the whole group, so you get a better data set... a much better representation.

Anthony Hughes, chief executive, The Credit Hire Organisation

Driscoll believes the revised GTA has a data-led approach that will eliminate the need for compromises or concessions from either side.

“This data-driven approach removes the human factor, ensuring decisions are purely based on data,” he explains. “This should provide greater certainty for both insurers and credit hire companies, while resulting in a good customer outcome.”

Winn says that for the revised GTA to succeed, it will require regular rate reviews, and insurers and credit hire companies may need to accept rates that fall outside their preference zones.

Winn is optimistic about the potential of AI to analyse large datasets and forecast trends, which will lead to quicker and more accurate decision-making.

Could the GTA use technology, such as AI, to have more regular rate reviews?

Highfield argues that implementing faster rate reviews, such as monthly ones, would be ‘overkill’.

“We’ve got a year review, which is a period of time that allows for maturity of data and fluctuation in trends.”

Where AI can help, Hughes explains, is with optical character recognition, which is used to scan documents. This could accelerate claims settlement.

Hughes enthuses: “What would be fantastic is if we get the GTA into a position where these cases are so formulaic that they are processed very, very quickly and easily because they fit the parameters that have been agreed.“

Vehicle categorisation

Vehicle categorisation has long posed challenges. The revised GTA plans to put vehicles into groupings for its annual rate reviews.

Competition lawyers have validated the whole GTA plan.

Hughes says: “Rather than vehicle by vehicle, we’re looking at the whole group, so you get a better data set, a much bigger data set, a much better representation.”

However, the growing presence of electric vehicles (EVs) presents new hurdles. Winn highlights that the lack of a proper classification system for EVs leads to inefficiencies and disputes, with their claims often clashing with the GTA framework. He believes that existing protocols can adapt more readily to newer vehicle types.

Driscoll agrees there are EV challenges. He points out the necessity for rates that reflect regional disparities in third-party EV claims, something not seen at present.

Yet, he remains optimistic about the GTA’s capacity to address the EV challenge.

”The GTA reviews data on a quarterly basis and as soon as the rates stabilise, we believe insurers and the CHO will be able to agree on reflective rates for EVs that are fair for insurers and [CHCs].”

With EV being a fast-evolving technology, accommodating EVs into the GTA is not easy.

Highfield explains that the nuances of EVs compared to internal combustion engine vehicles make them more complex. Probably the biggest obstacle is the lack of sufficient data to determine appropriate rates, which prevents meaningful market consensus.

He is keenly aware that when rating EVs, a balance must be struck. Rates should be manageable for credit hire while acknowledging from the insurer side that EV operating costs are gradually decreasing.

“We’re in a space where there’s a bit of settlement needed,” he says. “There is an awareness that, generally, groupings need to be looked at, and it’s absolutely on our agenda to revisit.”

Focusing on partnership and mutual benefit reduces disputes, fosters collaboration and creates trust. For GTA 2.0 to succeed, it must adopt these principles

Jeff Winn, Winn Group

The future

For all the positive changes in GTA 2.0, perhaps its success will hinge not so much on the detail, but rather human relationships.

Those who have seen credit hire and insurers clash over the years might wonder whether the there is enough trust between parties for GTA 2.0 to succeed.

Chamberlain says: “The success of the GTA 2.0 will depend on creating a structured process for oversight, improving clarity and controls to ensure adherence to agreement, and having representatives from both sides that are willing to compromise to reach mutually beneficial outcomes.”

Although Winn has doubts about the GTA because of its perceived inflexibility, he echoes this need for compromise: “Focusing on partnership and mutual benefit reduces disputes, fosters collaboration and creates trust. For GTA 2.0 to succeed, it must adopt these principles and create a framework where both insurers and [CHCs] feel confident they’re working toward shared goals and a better outcome for customers.”

A major change in the revised GTA is the introduction of a strategy board, a move that Chamberlain hopes will drive “positive, pragmatic change”.

Driscoll is optimistic about its role in bringing people together and overseeing success.

“This year the GTA introduced a strategy board to review the policies and principles for its future,” he says.

“Collaborative efforts have already led to some great initiatives, including an agreement aimed at reducing credit hire claims ending up in court.

“This demonstrates our commitment to working together, as litigation only adds time and cost to the claims process and is damaging to the customer on both sides.”

Eyeing one measure of success, Hughes says cases with claims on both a replacement vehicle and personal injury sometimes still currently end up in county court.

If the revised GTA can end up ‘breaking the chain’, by removing the vehicle element from the courts completely, that will be a real success.

Encouragingly, he’s had enquiries from both insurers and CHCs currently outside the GTA.

He concludes: “If GTA 2.0 is something where other people say ‘At last, you’ve made you’ve made a difference – these are the kind of things that would have made me want to be part of the GTA’, then that is a real validation of the work we’ve done.”

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