From protocol agreements to ESG innovation – getting to grips with auto insurance challenges

Motor insurance premiums have recently been enjoying increased time in the spotlight after Shadow Transport Secretary Louise Haigh promised that, if elected to power, Labour would launch a probe into soaring insurance costs. Labour’s proposed strategy for addressing premium pricing was later criticized by Aviva CEO Amanda Blanc as “fundamentally flawed,” who noted that the party’s planned approach is akin to taking a “sledgehammer to crack a nut.”

As director of commercial sales for AX – the brand behind the incident management company Motor Assist – Steve Molloy (pictured) has a front-row seat view of the pricing challenges facing the market and of the range of solutions being explored to mitigate them. From integrated technologies, including biometrics, to anti-fraud measures, there’s increasing emphasis on future-proofing claims costs, he said. An area of interest for his team at Motor Assist is the cost-saving implications of insurers developing effective protocol agreements.

“What we’re all hearing all the time at the moment is that everything’s going to be more expensive,” he said. “And there’s a lot of discussion about how motor insurance premiums just seem to be increasing and increasing – and what we can do about that. There’s talk about the government potentially stepping in to reduce IPT, etc. But actually, I see that there’s a lot we can do to help, and I see that claims managers and insurers are working a lot more effectively together under these protocol agreements.”

The power of protocol agreements

Providing insight into what these agreements look like in practice, Molloy highlighted that they are struck up where there’s a strong and trusting relationship between the company that’s managing the claim and the company that’s paying the claim. If you’re effective, fair, and reasonable in your management of a claim, he said, then the insurer will pay out that claim more quickly on a quid pro quo basis.

“So, we’ve spent a huge amount of time reducing hire periods and managing key-to-key times with repairers,” he said. “The only way you can do that is by ensuring that you’ve got a very capable repair network with repair shops that are qualified and have the capability to manage the repair. And that’s not just on current vehicles but on future vehicles as well because changing technologies means there’s a changing skill set required within a lot of our repair networks and repairers.”

Innovating amid EV upheaval

For example, he said, while the market’s electric vehicle (EV) volumes have flatlined in the last year, Motor Assist still recognises its responsibility to make sure its body shops are capable of providing the right repairs and also able to provide cost-effective like-for-like replacement vehicles. There’s no point in deploying an EV repair to a body shop that’s not well-versed in how to deal with the safety implications of handling EV repairs. It’s all about having a robust procurement program in place – and having the right repair network partners is key to that.

“Also important to note is that some of the cost increases have come through the vehicle rental sector,” he said. “When you look at COVID, and even coming out of COVID, manufacturers prioritized the retail sector over the commercial sector. So, precuring new fleet vehicles from manufacturers was nigh on impossible and expensive because they were providing very little to the hire car companies.

“We looked at a number of different measures. We had to extend leases from two to three years, which comes with complexities and additional costs as well. Then there was the chip shortage a couple of years ago that had a massive impact on the majority of manufacturers and led to delays in bringing new vehicles to market. However, now we’re seeing a lot more supply coming into the market which is helpful to our business.”

What’s behind strong insurer relationships?

Molloy noted that underpinning strong insurer relationships is a commitment to providing innovative solutions to the challenges faced by the market. Where he’s seeing a real challenge today is around the demand for EV vehicles. There’s high demand for EVs among fleet customers and commercial customers, he said, as the majority of EV vehicles are currently being purchased through salary sacrifice schemes, as part of a company car scheme. But the high cost of EVs, and ‘range anxiety’ means there’s not a huge number of retail customers buying these vehicles directly.

The insurance industry wants to make sure it’s up to speed with EVs, he said, but in order to do that the manufacturers and the government need to work closer together to make it easier for the retail sector to buy these vehicles. AX and Motor Assist are currently in conversation with a lot of insurers about their ESG strategies and how EV vehicles fit in with the mobility aspect of those strategies.

Supporting the transition to EVs

Where AX and Motor Assist see an opportunity to help smooth the transition to EVs – whether they are fleet or private buyers – is through its EV-for-EV guarantee. Molloy noted that AX was the first to introduce a service which promised an EV replacement vehicle if an electric car driver had an accident, ensuring continuity if their vehicle is off the road.

“Swapping your combustion engine car with a fully electric vehicle is a major decision; it involves some compromises as well as massive upsides,” he said. “The last thing you want following the misfortune of being in an accident is to be handed an old diesel replacement – it would feel like a huge backwards step even if it is only for a few days or weeks. 

“[…] We feel it helps remove one of the barriers which makes people hesitant to adopt EVs: what to do when there’s an incident. It also helps fleets and insurers to improve their sustainability credentials, and for insurers particularly, it provides a vital competitive advantage. We have positioned ourselves as a big supporter of EVs and the transition that’s taking place; there are lots more plans to expand our EV services which will ramp up our efforts to encourage EV ownership.”