Motor insurance industry to be investigated
The Office of Fair Trading is not happy with the world of motor insurance and referred the entire industry to the Competition Commission. This all comes on the back of RBS floating Direct Line (for a £2.6bn).
Those hoping to bid on Direct Line are saying that RBS are refusing to engage in discussions, which is raising some serious questions. One of the big issues is that selling to private equity buyers could well see more money returning to taxpayers (who, if you'd forgotten, own 82% of RBS).
"There is no engagement, which is very difficult," said a source. So what are RBS up to? And this isn't the first time there's been bids on Direct Line. A consortium tried to land the insurer for a figure in advance of £5bn, which RBS claimed wasn't a concrete bid.
The Competition Commission is now investigating the sector because the OFT feels that the structure of the market was making costs and premiums unnecessarily high. "Competition appears not to be working effectively in the private motor insurance market," said OFT chief executive Clive Maxwell. "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."
These practices are pushing up premiums by around £225m a year.