Another day, another potential scandal for the industry, this time from a group of credit hire workers who allegedly invented data on rates

Here we go again: yet another scandal for the insurance industry, and this time it’s credit hire.

Seven former staff workers at Autofocus face jail for alleged contempt of court. The staff had the job to investigate, on behalf of insurance companies, typical car hire rates in areas where crashes occurred.

The company’s research results were used in a vast number of cases to calculate reasonable contract car hire rates for replacement vehicles – but the seven allegedly based it on hundreds of phantom telephone calls that were never actually made.

Good news, bad news

It’s easy to lose count of the number of scandals to hit the insurance industry. We’ve had payment protection insurance, referral fees, subrogation and now this. What next?

The good news for the industry’s reputation is that this Autofocus dispute is pretty arcane to the average consumer, and will probably remain confined to the pages of the trade press.

The bad news is that more and more insurance scandals will continue to rear their ugly heads over the next few years.

The reason is that the insurance industry is ferociously competitive and has given customers exactly what they want – cheap deals.

But, in desperation to make up for selling such cut-price policies, companies have turned to ancillary products.

The ancillary angle

Ancillary products are relatively easy to sell – and easy to make a large profit margin on.

To the regulators, the juicy profit margins, combined with the perceived difficulty in policyholders successfully making a claim, is alarming.

It has meant that products such as warranty insurance, car key insurance and ID theft cover are now firmly in the spotlight of the watchdogs.

As a result, it would be no great surprise to see motor legal expenses insurance come under fire next. Watch this space.

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