From vehicle size to type, motorists need to be given greater choice by insurers when their car is off the road. James Roberts, business development director for insurance at Europcar Mobility Group UK, outlines some suggestions as to where flexibility could play a greater role.
The motor insurance sector is facing interesting times as last week’s Post Motor Insurance World conference highlighted.
Challenges are coming from all corners – from the repair cost implications of the growing market of advanced driver-assistance systems enabled vehicles to tackling the theft threat of keyless cars. And that’s all while addressing the age-old conundrum of how to achieve customer satisfaction – and retention – while keeping an eye on costs and profit.
One area where customer satisfaction could be enhanced – particularly in relation to the claims experience – is by offering more choice of mobility options to the policyholder when their car is off the road. I believe the argument for more choice is clear. While policyholders have made the decision to own a car for their day-to-day lives, if the vehicle is off the road for a period of time they may want the flexibility of just having another way of getting round, but not necessarily be tied to a car that may not actually be similar to their own.
Those living in urban conurbations may well have chosen the engine size of their car based on local parking and congestion rules. If they suddenly find themselves in a car that isn’t of the same spec, could they face fines or increased parking costs?
There’s also plenty of data that shows that urban drivers do significantly less miles than those living in rural locations.
A Department for Transport study from 2015/2016 found that people living in rural areas travelled on average 10,200 miles compared with 5200 in urban conurbations. When travel as both a driver and as a passenger is considered, 88% of the distance travelled by people living in rural locations was made by car compared to 69% in urban conurbations.
Plus, data from the DfT for 2016/17 showed that people living in rural areas made more trips and travelled further than those living in urban areas. Indeed, those in the most rural areas travelled almost twice as far on average than people in urban conurbations (including London), with the difference in overall trip rates between types of residence mainly due to a difference in the levels of car use.
And what about the growing electric revolution? Early adopters of electric vehicles are passionate about their choice. They probably made it for ethical as well as economic reasons. So how will they feel if the replacement vehicle they’re offered isn’t electric – and maybe is even diesel. All the benefits of electric motoring – free parking, no clean air zone fines – could suddenly disappear.
But there are definitely barriers that the insurance sector needs to overcome to adopt a more flexible choice-driven approach to replacement mobility. First and foremost, insurers need access to a range of mobility options, ideally all from one platform. Some customers might welcome the chance to simply use mobility vouchers to access car share or car clubs – including electric car clubs like the Europcar Mobility Group owned E-Car Club. Others might be just as happy to use public transport.
The credit hire regime also presents challenges. Under its current regime there is no place for choice other than a hire car for the duration of repair, even though that might not meet the needs of the claimant. Yet it is highly unlikely that a credit hire company will offer a taxi, car share or rental only on the days needed even though they may wish to offer such services. There is simply no way of making this commercially viable.
The other big hurdle the sector needs to jump is the current structure of the [credit hire] general terms of agreement. As it stands, there is no specific vehicle category for EV, hybrid or other alternative fuelled vehicles, with it potentially being a matter of guess-work into which GTA vehicle category a vehicle should be placed for a credit hire claim.
Maybe now is the time to recognise this and award electric vehicles their own GTA vehicle category? That seems like a practical approach and an easy way to remove opinion and frictional cost from the claims process.