The Office of Fair Trading (OFT) has made the decision to provisionally refer the private motor insurance market to the Competition Commission after it found that companies are competing in a ‘dysfunctional way’.
OFT has reported how insurance firms are taking advantage of a lack of control in the industry to inflate the cost of insurance premiums by £225m per year. The OFT report has stated that although the government has focused attention on the legal costs associated with personal injury claims, if tighter regulations are not put in place to govern the cost of replacement vehicles and repairs after an accident, then the inflated insurance premiums are ‘likely to persist’.
Chief executive from the OFT, John Fingleton, said that because insurers are not competing on quality and value of service ‘drivers pay more than they need to for their motor insurance policies’.
MASS Urges ‘Full Disclosure’ To Deal With Insurance Premiums Increase
Chairman of the Motor Accident Solicitor’s Society (MASS), Donna Scully, believes that the problem of insurance premiums increase could be revealed to be ‘immense’ once it has been completely investigated. She added: “Money is clearly being made from consumers behind their backs and MASS would welcome full disclosure of specific income on every case so that the consumer is fully informed.
“It is no wonder the whole sector has fallen into disrepute and that consumers are so wary of everyone who operates in it, and frustrated by exploitative practices they are likely to encounter when they make a claim.”
The report from the OFT has stated that in exchange for a fee of between £250 and £400, insurers often refer the drivers not at fault for an accident to credit hire firms that will then charge higher daily rates. The driver not at fault for the accident were also said to receive replacement vehicles longer than necessary, bumping up the cost for the insurance company of the driver at fault for the accident.
It has been estimated that the cost of vehicle repairs and replacements is estimated to add approximately £10 per premium to every driver in the UK.
The OFT expects final decision on the referral to be reach by October 2012.
• Duncan Gibbins Solicitors are personal injury specialists who can provide free, no obligation advice on all aspects of your claim. Call to speak to a member of our team today.
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