OFT hits out at insurers

The car insurance industry has been branded ‘dysfunctional’ by the Office of Fair Trading (OFT) and is now facing a full inquiry by the Competition Commission.

The Government watchdog says that £560 is added to the cost of every crash by referral fees and loan cars from credit-hire firms. Plus, repair bills for vehicles of not-at-fault drivers are increased £155 due to the cosy relationship between insurers and approved repairers.

According to the OFT, certain insurers permit their repair shops to charge higher labour rates when they know the cost will be passed on to a competitor insuring the at-fault driver.

OFT chief executive John Fingleton said: “We believe insurers’ focus on gaining the competitive edge through raising rivals’ costs means that drivers pay more than they need to for their insurance.

“As insurers are distracted from competing primarily on the quality and value of the service provided to the insured, incentives for efficiency may be reduced.”