Under the bonnet

The tumultuous fortunes of credit hire giant Helphire have rarely strayed far from the headlines over the past year. While most credit hire operators (CHOs) have suffered badly in the recession, none have been hit quite so spectacularly as Helphire. With a plunge in profits, large-scale staff cuts, managerial shifts and the loss of a major deal, the company is likely to look back on 2009 as its annus horribilis.

It was all going so well, too. By the mid-noughties, the company had emerged from the flourishing credit hire market as one of its major players, posting a respectable pre-tax profit of £43m for 2007/08. But then everything changed. AA/Saga dealt the company a major blow when it dropped its longstanding contract in favour of setting up its own credit hire firm. This business was believed to account for 22% of Helphire’s case hire volumes and 11% of turnover.

Meanwhile, the revolving doors at senior level accentuated the firm’s ongoing struggles. Martin Ward was newly installed as group managing director, while three of the founders of Helphire-owned Cab-Aid – Steve Bilham, Steve Johnson and Dilip Patel – left in the wake of the appointment of new Cab-Aid director Sandra Cox. These power transfers were accompanied by large-scale restructuring, with plans to shed 1,250 staff. The end of the year struck a glum note, as the company emerged with a pre-tax loss of £149m – a profit drop of more than 90% – leaving the future of the company uncertain.

The nosedive in the company’s fortunes has caught some market insiders by surprise. AXA’s claims director, David Williams, says: “Eighteen months ago, I was betting that one of the big credit hire companies would fold. At that point in time, I didn’t think of Helphire. But now they seem to be everybody’s favourite.” So where did it go wrong?

The downturn played a part, of course, curbing people’s buying power. “There is an overall macro-economic impact in that people didn’t drive as much and therefore there was a general lack of accidents,” Helphire’s technical director Alan Gilbert says. He adds that overcapacity in the body shop market was also a factor. But the major leak on the balance sheet came from the outstanding debt the company claims it is owed by insurers. By the end of the first quarter of 2009, the company held that “certain insurers” owed Helphire £279m.

Insurers, however, see things differently. They believe they have become better at playing the credit hire game. Williams says: “Insurers have got much better at defending spurious claims from the credit hire industry. A lot of CHOs became fat and bloated because we, the insurers, were letting them make easy money and a lot of the time making payments that we felt were not justified.”

Some insurers point out there were some problems specific to Helphire that accelerated its downward spiral. “Their relationships with insurers were poor,” Allianz motor and casualty claims manager Martin Saunders says. “The way we saw things developing was such that they were not monitoring their hires and in turn those cars were becoming more expensive. They couldn’t document the hires, so they couldn’t substantiate the claims they were making against us and we then ended up in conflict.”

Uphill struggle

But 2009 was not all bad for Helphire. One of its key strategies has been to chase insurers through the courts to claw back outstanding debt. In June, it secured a landmark win, hailed as a victory for the overall credit hire market. In the case of Copley v Lawn, the not-at-fault party turned down the at-fault insurer’s offer of an alternative vehicle and opted to take one from Helphire instead. The at-fault insurer refused to pay its bill. The courts later ruled in Helphire’s favour.

“That altered considerably the intervention models that many insurers were using and the benefits of trying to intervene. The legal backing for credit hire has never been stronger,” Accident Management Association director-general Tony Baker says.

Gilbert sees the ruling as a turning point. “Copley was the high watermark of credit hire litigation, and that was an important judgment for us and the credit hire market,” he says.

Notwithstanding legal triumphs, Helphire unquestionably faces an uphill battle to maintain its position in the marketplace. Gilbert, however, is adamant that the company is on the road to recovery. Last year, it merged the Bristol office into its main Bath office, reduced its fleet from 21,000 to 16,500 vehicles and made substantial cost cuts.

“We have formed one single accident management business under one single management structure, and that has allowed us to present a much more co-ordinated front to the marketplace and deal much better with both insurers and our suppliers,” he says firmly.

Furthermore, Gilbert is dismissive of AA/Saga’s inroads into the credit hire market. “AA/Saga may not find operating a credit hire company quite as easy as they thought they would when they started out, and it is yet to be seen how the rest of the market reacts to them. You have to have a very good idea of what you are doing … and we have been doing it for a long time.”

When approached by Insurance Times, an AA/Saga spokesman said: “We are happy with the decision we have taken and that our customers remain satisfied.”

But how has Helphire managed to compensate for the loss of this business? In defiant mode, Gilbert says that the company does not necessarily see AA/Saga as a great loss – “the terms of the agreement were not favourable to us”– but says the company is moving towards filling the gap through wins with insurers such as Hastings.

Gilbert refuses to disclose any additional names, merely adding: “We have a number of small wins under our belt and a very healthy pipeline of new business coming through.”

He bristles at the notion that litigation remains Helphire’s main strategy for getting back on track. “We have many other ways of dealing with insurance companies,” he says. “We deal with the vast majority of insurance companies perfectly amicably, but there are times when a competent tribunal has to decide the matter.”

He is tight-lipped on the number of cases the company is currently pursuing, conceding it has a “fair few”. In fact, towards the end of the year it emerged the firm had 27,632 cases, with a value of £47.1m, in the hands of their solicitors.

Nonetheless, Gilbert insists the company’s leading figures are making progress with their relationships with insurers, pointing out that Ward is particularly well known to the industry.

But while Helphire argues that it is eagerly waving the white flag, insurers seem less convinced. Groupama’s technical claims manager, Neil Joslin, believes there is paltry evidence of an improved approach.

“We did go through a period where we thought that Helphire were more insurer-friendly, and this was perhaps at the same time that it was quite public [in saying] that it was being more insurer-friendly. But to be honest, from what we have seen at our desks, that has been quite short-term. We haven’t seen that Helphire, above any other kind of organisation, is really trying to fulfil that pledge to try to work closer with insurers,” he says.

No write-off

None are dismissing Helphire just yet, however. The line seems to be that if the company makes the right moves, insurers will be open to doing new business with them. “The message we have given to Helphire is that we will work with them once they have sorted themselves out, know and understand that they do control costs, and they do control times and repairs,” Saunders says.

Joslin adds: “We would like to think we are open for business with any of the credit hire organisations, but we always like to feel a willingness from the third party to do business with us and that is not always the case.”

Gilbert believes the company is taking steps in the right direction, through investment in electronic trading and the promotion of fixed-price deals. Helphire claims to have reached a fixed price for faster payment deal with one of its insurer clients and has pilots with other insurers. This approach is expected to cover 13.5% of new cases going forward. Gilbert is optimistic this figure will grow in the coming year.

But it remains unclear whether insurers will be willing to embrace this new strategy. Saunders points out those insurers are only likely to adopt fixed-price deals with companies widely seen as efficient operators.

The one thing that everybody agrees upon is that the future holds great changes for the credit hire market. Zurich’s motor claims director Tony Emms warns that any credit hire operators that have built a business model based upon the recovery rate of historical debts will continue to be hit by a reduction in their margins.

“One of the problems CHOs are facing is that insurers are starting to get their act together. They are no longer paying the excessive penalties they were paying a few years ago. They are starting to use outsourcing models and validating tools, they have improved time cycles and reduced overall claim costs,” he says.

Gilbert insists Helphire will remain a leading force as the market continues to evolve. “I think in five years’ time, things will look different. There will be a lot more standard hires, and there will still be an element of credit hire … We are going to continue to lead the market.”

For the moment, most agree that the floundering fortunes of Helphire signal little change in the overall marketplace: credit hire is here to stay for the foreseeable future. Saunders believes there is now potential for other operators, such as Drive Assist and Enterprise, to rise to the forefront of the market, while other operators will concentrate on prestige or niche areas.

“There is room for two or three significant players,” he says. Helphire will be hoping to reverse its fortunes and remain one of them. IT