Managing the rising costs of AA

The cost of alternative accommodation (AA) has risen sharply and now represents an area where insurers can substantially reduce their indemnity spend.

However, in many cases, incorrect or inefficient processes are costing them tens of thousands of pounds per claim.

Tim Goodman, Managing Director, ICAB, revealed that in the last three years the total cost of accommodation has increased by 48%, 22% and 24% respectively.

A number of factors are impacting the market, such as high demand in hotels, tourism and events returning to pre-pandemic levels, strong rental demand and growing demand for self-catering accommodation.

As a consequence, ICAB has seen self-catering costs rise by seven per cent, hotel stays up by nearly the same amount, while monthly rents have risen by just over five per cent.

With the average cost of a settled claim up 23% from 2021-2022 and already 33% higher this year, Tim has urged insurers to focus more attention on AA as a means to reduce costs.

Potential savings

He presented two case studies which highlighted the potential savings that can be made if AA is managed correctly.

The first was a fire-damaged property for a family of four. ICAB’s first instruction from the insurer was to find hotel accommodation for the family for two weeks. However, as the length of the claim became clear, ICAB was instructed to move the family to a serviced apartment for the next three months. By moving the family out of the hotel, accommodation costs were cut from £30,600 to £14,530.

Tim said, “If you multiply this saving over 100 similar claims a year, there would be savings of more than £1.5m.”

The second case also involved a family of four. When their property suffered water damage the insurer asked ICAB to book the family into a hotel for three nights. However, that hotel stay was extended on four occasions, taking it to 36 nights at a cost of £12,240.

Finally, ICAB was asked to find a serviced apartment for the family for three months, which cost £12,150,

Tim said, “Accommodation for the first month cost more than the next three combined. This demonstrates how costs can escalate if the correct processes are not adhered to. With AA costs increasing across the board, it’s vital we all think about time-scales upon instruction to save indemnity spend.”

Tim was speaking in a breakout session entitled, ‘The changing landscape of alternative accommodation,’ at ILC’s MGA Claims Conference. It was one of a number of breakout sessions on the day.

Held in association with the MGAA, ILC’s MGA Claims Conference took place in London last month, supported by Headline Sponsor Claims Consortium Group (CCG); Gold Sponsors: Activate Group, Carpenters Group, EDAM Group, Enterprise, LexisNexis Risk Solutions, Pulse, Value Checkers, and Wiser Academy.


Upcoming Event

Motor Claims News

Copart backs Global Car Recycling Day

ARC360 | ILC News | Motor


Autoglass technician takes Best of Belron silver

ARC360 | ILC News | Motor


Insurer Partners


Industry Body Partners

Insights Partners

Motor Corporate Partners

BHR Assist Insurance Services