People borrowing cars when their own vehicle is damaged is leading to premiums rising across the board, new analysis suggests.
Credit hire companies that lend cars to people whose own vehicles have been damaged in accidents are causing the average car insurance premium to rise by £20, according to Zurich.
The firm claims that the companies provide the cars and then seek costs from the insurer of the 'at fault' person in the accident, the BBC reports. This causes a lack of incentive for them to keep costs down, leading to big pay outs by insurers, which in turn raises the average premium's cost.
In some instances, insurers have refused to pay, leading to court cases. Beverley Hope-Smith told BBC Radio 4's Money Box programme that she had been advised by a credit hire company that she would not need to pay for a replacement vehicle following an accident.
However, due to the repairs taking three months, the final bill for the replacement ended up at £16,000 - resulting in the insurer not paying and Ms Hope-Smith having to go to court on the company's behalf.
But the UK's biggest credit hire company, Helphire, told the programme that it has voluntary agreements with insurers on costs and time periods.
"There is an agreed rate for the hire of a vehicle so there is no question of charging more than that rate. Were we to do so, the insurer would, rightly, not pay the bill," said managing director Mark Adams.
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