Insurance investigation
An investigation has been launched into the car insurance industry, in a bid to lower premiums
The motor insurance industry is officially under investigation by the Competition Commission (CC). The Office of Fair Trading (OfT) warned that it might refer its case to the CC back in May if, after a public consultation, it still suspected there were features of the market that “prevent, restrict or distort competition”. Four months later, the OfT has now confirmed that it does.
Clive Maxwell, OFT Chief Executive, said: “Competition appears not to be working effectively in the private motor insurance market. The insurers of at-fault drivers appear to have little control over the bills they must pay, and this may be leading to higher costs for them and ultimately higher premiums for motorists.
“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.”
In its original market study, the OfT concluded that motorists were paying up to £225million more in premiums than they needed to – adding an average £10 per year to the cost of insuring a car.
But it was the cost of hiring courtesy cars that producing the most shocking findings. The OfT claimed it was, on average, £560 more expensive to hire a courtesy car for a not-at-fault driver than necessary. Plus, repairs were an average £155 dearer than they needed to be.
The Association of British Insurers said it welcomed today’s announcement that the CC would now investigate the industry. Its Director of General Insurance, Nick Staling, said: “The OfT found what insurers have known for years - that when a customer has a crash that is their fault, the insurer has little control over the cost of the subsequent claim. In particular, for too long insurers have faced inflated rates for credit hire cars and excessive hire periods which have led to higher insurance premiums for customers.
“Regulation of all players in the market to tackle excessive costs is needed, and we look forward to working with the Competition Commission to bring much needed reforms to the market that will, in turn, result in lower car insurance premiums for consumers.”
