By Bob Howard
BBC Radio 4's Money Box
Mr Emms says hire companies are not incentivised to keep costs low
The rise in claims made by credit hire companies adds £20 to the average car insurance premium, says insurer Zurich.
The companies loan vehicles to drivers whose cars are damaged and recoup the cost from the "at fault" insurer.
Some insurers claim the bills are unreasonable and refuse to pay, leading to more cases going to court.
The credit hire firms insist they charge according to an agreed formula and insurance firms incur costs through penalty charges for late payment.
Shock and anger
Beverley Hope-Smith from Essex was recommended to contact a credit hire company after her car was involved in an accident which she was not responsible for.
As she was the innocent party, the firm said she would not have to pay for the replacement car.
Instead, it would claim the cost from the insurer of the driver who was at fault.
Although the car was only worth about £4,000 the repairs dragged on for three months, so the final car hire bill came to £16,000 or about £200 a day.
She told BBC Radio 4's Money Box programme she was astounded it was allowed to reach that level:
"I was absolutely speechless.
"It seemed to me that either the accident management company or the other insurer at some point must have said 'does it really take three and a half months to repair a vehicle?'"
Shock turned to anger when the insurer refused to pay.
Beverley was then summoned to appear in court on behalf of the accident management company as it tried to force the insurer to pay up.
In the end, the case was settled out of court.
Tony Emms, motor claims director for the insurer Zurich, is clear where the blame for the increase in disputes lies:
"Credit hire companies pass on their invoices to the insurer of the responsible party so they're not incentivised to keep the overall hire cost to a minimum."
The costs can also rise as a result of commission often paid by credit hire companies to garages, breakdown companies and sometimes insurers themselves for referring accident victims to them.
Tony Emms says the overall effect is leading to a significant rise in the cost of car insurance premiums:
"If you take the average motor insurance premium of around £400, it means each customer is potentially paying £20 a year more."
Credit hire companies insist their charges are reasonable.
The company Helphire is the biggest with a turnover of around £400m.
It was not involved in Beverley's case, and its managing director Mark Adams says it adheres to a voluntary agreement with insurers which fixes acceptable hire costs and hire durations.
"There is an agreed rate for the hire of a vehicle so there is no question of charging more than that rate.
"Were we to do so, the insurer would, rightly, not pay the bill."
BBC Radio 4's Money Box was broadcast on Saturday,
22 November 2008 at 1204 GMT.