Credit Hire Defined

• When a UK driver is involved in a no-fault accident -- such as being rear-ended by another driver -- she may be offered a replacement vehicle at no charge while repairs to her own car are being made. The replacement vehicle is rented -- or "hired" in UK parlance -- by an "accident management" company or the repair shop, which then extends credit to the accident victim by deferring the rental charges with the expectation of being able to claim these costs from the other driver's insurance company. The British term for this type of arrangement is called "credit hire," and the organization that obtains the rental car receives a commission from car rental companies based on the cost of each rental.
  
  

Credit Hire Fraud Statistics

• UK insurers spend nearly $1 billion each year on credit hire fees, which are involved in 91 percent of all fraudulent claims. The annual cost of all auto insurance fraud in the UK is estimated at about $1.5 billion. With numbers like that, it's no surprise that organized crime families have gotten involved, some even setting up accident management firms specifically for the purpose of defrauding insurance companies.
  
  

Credit Hire Fraud Methods

• Fraudsters use a variety of crooked means to extract payouts from insurance companies. Repair shops may drag out the time taken to complete repairs, thus extending the rental period - and their commission. Accident management services -- especially those that own their own fleets -- may base their fees on inflated daily rental rates and submit multiple claims for rental of the same vehicle.
  
  More organized criminals form networks of collaborators use such fraudulent tricks as causing accidents by stopping suddenly in front of another motorist, submitting claims for which no accident actually occurred, or deliberately damaging a vehicle and then submitting multiple claims.
  
  

The Ultimate Victims of Credit Hire Fraud

• While auto insurers have toughened up in some respects, they are still playing catchup when it comes to credit hire fraud. Unfortunately, it's the individual driver who ultimately pays the price for this. In the UK, premiums for car insurance -- which is mandatory -- went up 40 percent between 2010 and 2011, and staged accident claims have been so common that drivers living in certain postcode areas have trouble obtaining any car insurance at all. Worse, there's no relief in sight: the head of credit hire at one national British law firm reports a 400 percent increase in staged-accident cases between May 2010 and March 2011.