The accusation comes just weeks after the Association of British Insurers teamed up with daily rental giants Enterprise Rent a Car and National Car Rental to offer insurers credit hire which they claimed tackled excessive costs elsewhere in the industry. The insurance industry says it has legitimate reasons for holding back on payments amid confusion over whether credit hire firms are legally entitled to demand payment for services provided to third-party accident victims.
The bitter battle began after a Court of Appeal ruling on a court case (Diamond v Lovell) which ruled that credit hire arrangements had to comply with the 1974 Consumer Credit Act, unless certain provisions make them exempt. Potentially, all credit hire agreements not covered by the act are unenforcable.
But credit hire companies claim insurers are disputing credit hire claims even if they are legitimate. Credit hire companies then have the burden of increased costs, both because they cannot repay debts and because they have to take legal action to obtain payments. An appeal on the decision is not expected until March, by which time many credit hire companies could collapse under the weight of their debts.
Jon Ralph, managing director of credit hire firm 3 Arrows, part of Avis Europe, said its future was more secure because of its hefty financial backing, but smaller players could not survive. Companies will fall by the wayside and there will be consolidation. The credit hire industry was set up for the victims of accidents because insurers were not prepared to meet their needs, but now insurers are looking to kill us.'
Michael Symons, chief executive of Helphire, said: 'Some insurers are not paying with no reason whatsoever. It puts up costs and pushed profit down and is an abuse of the court process.'