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Car Insurance Costs Set to be Studied by the Competition Commission

The Office of Fair Trading (OFT) last month called for the Competition Commission to investigate car insurance costs, after finding the market was "dysfunctional".

 
PRLog - Jul. 5, 2012 - NORWICH, U.K. -- The reasons behind this call for an investigation is that the OFT says the artificially high car hire and repair charges add £225m a year to drivers' premiums.  

The Association of British Insurers (ABI) welcomed OFT's announcement.  Nick Starling, Director of General Insurance of the ABI pointed out that drivers were bearing the cost and said "For too long insurers and people paying premiums have faced inflated rates for credit hire cars and excessive hire periods, which have led to higher premiums”.  He went on to say "There is no control of costs which have run away, and some people have taken advantage of the system".

The OFT explained that when a claim is made, the insurer of the "at-fault" driver will have to pay for repairs and temporary car hire for the other driver in the accident.  It’s these costs, which are inflated by the insurance company of the "not-at-fault" driver arranging costly car hire deals and repairs.   The insurance company then receive a fee from the said car hire business or garage for giving them this business.  The OFT found that on average this made replacement car hire £560 and repairs £155 more expensive for each claim.

You may think that this cost falls to the "at-fault" driver’s insurance company, but it is eventually passed on in the form of higher premiums to us all.

"Insurers of the not-at-fault driver and others, such as brokers, credit hire organisations and repairers, can take advantage of this lack of control as an opportunity to generate revenues through rebates and referral fees and so inflate the costs of insurers of at-fault drivers," the OFT explained.  "This is an inefficient way for the sector to operate, raising the total costs for providing private motor insurance (http://compareinsurers.com/Car-Insurance/Car-Insurance-Pr...) which drivers end up paying."

The OFT's decision to refer the car insurance market to the Competition Commission is a provisional one and they will announce its final decision in October 2012.

The Executive Director of Which? Richard Lloyd, agreed change was needed: "Consumers have been hit time and again with significant increases in costs for their car insurance without seeing increased benefits to their policy.  "We would also welcome an investigation by the Competition Commission to put an end to bad practices and give consumers get a better deal on their car insurance (http://www.compareinsurers.com/)."

This can only mean good news for drivers with hopefully a reduction in the price of our car insurance premiums (http://www.compareinsurers.com/Compare-Car-Insurance.aspx) if this practice can be curbed.

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Location:Norwich - Norfolk - United Kingdom
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Tags:car insurance, competition commission, car insurance quotes
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