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Car insurers face Competition Commission investigation

The Office of Fair Trading has referred the car insurance industry over concerns that restricted competition is pushing up premiums.

Car insurers face Competition Commission investigation

The car insurance industry is to be investigated by the Competition Commission amid concerns that it is failing motorists.

The Office of Fair Trading (OFT) warned in May that it has reasonable grounds to suspect that some car insurers are acting in a way that 'prevents, restricts or distorts compensation in the motor insurance market'.

The OFT’s main concern is that when there has been an accident the insurer of the ‘at fault’ driver has little, if any, control over the way repairs and replacement vehicles are provided to the ‘not at fault’ driver. As a result, insurers of the 'not at fault’ driver, credit-hire organisations and repairers are able to engage in practices that inflate their costs higher than they might otherwise be.

Inflated premiums

Ultimately, this leads to higher premiums for motorists. In fact, according to the OFT’s report in May, dysfunctional competition could be pushing up premiums for drivers by as much as £225 million a year.

Clive Maxwell, chief executive of the OFT, said today: 'Competition appears not to be working effectively in the private motor insurance market.

‘Having publicly consulted on our provisional decision, we are still of the view that there is no quick fix to these problems, and that a more in-depth investigation by the Competition Commission is therefore appropriate.'

The Competition Commission now has up to two years to report its findings. If it finds that features of a market are harming competition, it has powers to introduce remedies to fix the situation.

Insurer welcomes OFT decision

Dominic Clayden, claims director at the UK’s largest insurer, Aviva, welcomed the OFT’s decision as an important step to stripping out the excessive costs that have driven premiums skywards.

‘We are particularly pleased that the OFT has expanded the scope of its referral to include non-fault personal injury claims, which have increased in recent years despite a long-term decline in the number of accidents on our roads,’ he added.

The news comes after MPs called on the government earlier this year to crack down on compensation culture in the UK, blaming 'spiraling whiplash claims' for rising car insurance premiums.

3 comments so far. Why not have your say?

Bill lawson

Sep 28, 2012 at 16:55

Staying loyal to a company is a mugs game after 30 yrs with RSA I discovered insurance at half the price on the internet I will shop around in the future

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Phili Goodacre

Sep 28, 2012 at 20:48

About time too. They all bitch about how much they lose each year yet spend millions advertising their wares. My wife was referred to an Accident Management company by the dealership after she declined the Insurers 'approved' repairer due to a past experience with their shoddy, second rate repairs. The Accident management company arranged a hire car for just one week for which they presented the insurer with a bill for £770. I've used SMART repairers on a number of occasions and the Insurance companies would do well to make use of them too. I know of one lady whose Porsche was booked in for repairs that had been quoted at over £2500 and a SMART repairer who was doing a small interior repair for her offered to do the repairs, which were fairly minor, which she accepted at a cost of under £300. The repair was perfect and she vented her feelings over the phone to the insurer while he was still there.

I've heard on many occasions when someone has asked for a repair estimate from a bodyshop their first question, 'is it an insurance job?' Now why should that make any difference?

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Sep 28, 2012 at 21:10

I have experienced this inflation by some claims companies (being thr not at fault owner-I wasn't in the car when it was hit), I was forced to accept a car larger than mine the "couldn't" provided a smaller car although I asked for it, and they went slightly ballistic. Then they tried to force me to accpet a settlement figure of nearly £1,000 less than the value of the car. A bunch of sharks and insurance brokers are in on this, they must get referral fees, although they denied it. I knew it was a racket and I wanted no part of it.

Treat claims managers with great care, in terms of truthfulness, they rank alongside estate agents and politicians and no integrity.

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