Inflated road repair costs hiking up car insurance prices

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When infrastructure is damaged in accidents, insurers foot the bill

Contractors cash in on post-accident infrastructure repairs, heightening costs for insurers and drivers

UK drivers are paying millions of pounds more for their motor insurance because of inflated compensation claims for damage to roads by contractors hired to repair them, according to a leading insurance adjuster.

The charge follows a successful appeal by CMA, a claims management and investigations company, on behalf of a motor insurer that had a £440,000 repair bill reduced by £309,000 after a review by government lawyers. 

In December 2016, an accident involving a Mercedes-Benz E-Class resulted in a section of the Higham Road Bridge on the A45 in Northamptonshire being damaged. National Highways, the government-owned organisation responsible for building and maintaining motorways and major roads in England, commissioned Amey, a contractor, to repair the bridge. As part of the work, Amey installed temporary traffic lights and a barrier that it left in place for two years until permanent repair work began in 2019.

Amey eventually billed National Highways £440,000 for its work, which the organisation paid before then billing the Mercedes driver’s insurer. However, CMA established that £276,000 of Amey’s £440,000 repair bill was for the traffic management scheme alone and that National Highways had paid Amey’s total bill without first checking that it was fair and reasonable.

Following CMA’s intervention, the Government Legal Department (GLD) appointed an independent quantity surveyor to review Amey’s work. Concerning the traffic management claim, the surveyor said: “There’s nothing that we’ve reviewed that could justify a cost of £276,359.77 that Highways England [renamed National Highways in August 2021] states has been paid out.”

Following the GLD’s review, National Highways and CMA agreed a reduced claim of £131,000. 

CMA managing director Philip Swift, a specialist in strategic road network claims scrutiny, said: “We deal with overstated road incident claims every day, but this is an especially egregious example. How did Amey come to charge £309,000 too much? Why did National Highways simply pay, no questions asked? We’ve repeatedly warned National Highways that its checks aren’t robust enough and its contractorsare taking advantage.”

Colin Lowther, head of service delivery at National Highways, denied that the organisation had been overcharged by Amey and said it has “robust” processes in place to ensure costs can always be accounted for “National Highways is entrusted with billions of pounds of public money every year, and we work diligently to ensure that every penny is spent appropriately,” he said.

A spokesperson for Amey said the repair work it carried out was different both in scope and in time from that considered by the government-appointed quantity surveyor. “Amey rigorously ensures that it always provides value for money maintaining the highway network to a high safety standard,” they added.

Claims made by National Highways or local authorities to recover the costs of repair work following an accident involving a third party are called green claims. In the year to March 2021, National Highways recovered £15.5 million in green claims from third parties. Critics accuse contractors working for National Highways and its predecessors of inflating the value of many such claims. It’s a practice that they allege has been going on for years.

During a House of Lords debate in 2017, the Earl of Lytton, a chartered surveyor, said overcharging was commonplace.

“Highways England’s contractors are apparently not averse to submitting inflated green claims for highway infrastructure damage caused during motor accidents,” he said. “These increase insurance costs and appear to [exceed] the contractual arrangements with Highways England, and yet nothing seems to be done about them.”

In the same year, CMA estimated that green claims had been inflated by a total of £10m over the previous three years. At the time, it had just won a court ruling against Kier Highways, a contractor, that it accused of submitting a higher claim for costs to its insurer client than it would normally have charged Highways England, including £70 an hour for “asset incident watchmen” rather than the £25 it charged Highways England for the same service.

In this case, Kier had charged the third party’s insurer directly, because the value of the claim fell below the threshold – typically £10,000 – above which contractors were expected to bill Highways England.

CMA is currently contesting a green claim from National Highways worth £230,000 and involving damage to a bridge, repaired by a contractor. According to CMA, the initial claim, received in 2017, indicated the value was less than £10,000, but by 2019 the final bill was £237,000, which National Highways paid. “We’ve asked National Highways for evidence of a pre-payment audit but have received nothing,” said Swift. “It has now appointed lawyers to pursue its green claim.”

Swift said this and the Higham Road Bridge case are the tip of the iceberg: “I believe green claims and charges imposed directly by contractors are inflated, typically by 50%. There’s talk of auditing procedures being tightened, but I can’t see that they will stop companies from profiteering at the expense of motorists. They will just find a different way and people will continue to pay more than they need to for their motor insurance.”

Council green claims kept in check

Green claims for recompense following repairs to local roads and roads infrastructure damaged by third parties are also issued by councils. The Local Government Association doesn’t collect green claims data, but a freedom of information request submitted to Devon County Council in 2020 revealed that the council had issued 101 green claims for repair costs.

However, it had successfully recovered only 56 of them, worth a total of £112,000. Extrapolated across England’s 24 county councils, this suggests that each year up to £3 million may be recovered from drivers and insurers. Since much of the repair work is done by councils’ own highways departments, it should be safe to assume the incidences of overcharging are at a minimum.

Source: Autocar

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