Car Insurance Scrutinised Over High Premiums
The Office of Fair Trading has referred the private motor insurance market to the Competition Commission for further investigation amid concerns that the market is dysfunctional.
The OFT, which provisionally decided to refer the industry to the commission in May, said there was "no quick fix" to the problems identified and that further investigation was needed.
The commission now has up to two years to report its findings, and OFT head Clive Maxwell 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."
News of the referral came just hours before Royal Bank of Scotland put the finishing touches to the stock market flotation of its Direct Line Group insurance arm.
It announced the float price between £1.60 and £1.95, representing between 25% and 33% of the existing shares and giving the group a market capitalisation of some £2.6bn.
In May, the OFT said the motor insurance market was "dysfunctional", with signs that insurers of at-fault drivers are being taken advantage of by insurers of not-at-fault drivers and others involved in providing repairs and courtesy cars.
This is thought to be inflating the cost of providing replacement vehicles by an average of £560 a time, while the cost of repairs was £155 more.
It said after crashes, many insurers of not-at-fault drivers, brokers and repairers, refer the drivers to organisations that tend to charge higher rates in exchange for referral fees of around £250 to £400 per hire car.
The bills paid by the insurers of at-fault drivers can be inflated further because not-at-fault drivers are given replacement vehicles for longer than necessary.
When it comes to repairs, bills paid by the insurers of at-fault drivers are pushed up because some insurers receive referral fees and rebates from repairers and suppliers.
Some insurers even have agreements with repairers to charge higher labour rates when repairing the vehicle of the not-at-fault driver.
These practices boost the revenues of the insurer of the not-at-fault driver as well as pushing up the costs for the insurers of the at-fault driver.
The higher costs are eventually passed on to drivers through higher premiums.
But, in response to the move, Credit Hire Organisation (CHO) director general Martin Andrews said: "The CHO understands this move from the OFT, given the complexity of insurer behaviour in the market for the supply of motor insurance and related goods and services.
"However, we continue to have serious concerns as to the long-term impact it may have on the motoring consumer and their right to mobility after an accident that was not their fault."
what do you think?
The insurance industry is it's own worst enemy - my wife had a slight prang and was questioned wehther she was injured. She said she'd had a stiff neck for a day but nothing worth mentioning thinking this would be the end of it - not a chance - the whole system of personal injury claims kicked off and was taken out of her control and there was nothing she could do to stop it. She even suspected collusion within the medical profession but could prove anything is called to do so. It stinks from start to finish.
I reckon it's the 'americanised' blame and claim culture we have embraced that's really the problem. There is lots of evidence of the personal injury firms being contacted by medical staff.. Lawyers always win.
We have personal experience of a rear bumper replacement by the insurers 'authorised' [whatever that means] repairer following a 3 mph impact taking 16 days to complete and the costing documents as seen were in the realms of fantasy. We researched and found we could have had the same job done privately in 2 days !
Yes, I had a similar experience....needed a rear bumper (i.e. a big piece of plastic) replacing after a minor shunt...not my fault, thank heavens....but saw the costing documents and it was over a grand! Mindyou, the proprietor of the repair shop does drive around in a Bentley...which might explain things a little.
Me lady had damage to her motor requiring re-spray the insurance approved body shop offered two prices one if she was claiming on the insurance and another is she was paying - guess which was the most expensive quote and not by a few pounds but by 2000. After a battle with the insurance company she found her own body shop who did a magnificent job for two thirds of the lowest approved quote. I have heard similar stories repeated time and time again and we are the mugs who foot the bill.
They might have done this years ago! :(
my god why have these so called experts taking so long to work this out .this thing has been going on for at least 20 years .garages dont want to do a cash job because they can screw the insurance company for so much more .
any insurance in this country is a rip off but unlike car insurance you can take it or leave it that's why they have you by the short and curlys .It the law you have to have it so they can charge what they like
I pay 3000 a year insurance. Almost 3 times yhe valie of my car... id happily pay 10000 per year and if i dont claim i should get it back.
And what will happen from this? Easy...premiums will go up...
When a car hit my parked car and the driver knocked on my door I exchanged insurance details and reg numbers and telephone numbers. Reported it to my insurance company who quickly arranged a temporary car while the repair of my car was completed. I was then contacted by the other mans insurace company offering all sorts of car hire and services. My response to this is contact my insurance company and not me. A third party wass engaged by the insurance company to handle the repair and car hire. This is why the cost of insurance goes up. You put in aditional layers which were not there before. Of course it will go up in the price of premiums a nice little earner. What a racket needs to e investigated