OFT smell something fishy in car insurance market
If you suspected that there might be something a bit iffy about the car insurance market, then it seems that you’re not alone – the Office of Fair Trading is about to get the Competitions Commission to take a close look at car insurance costs after announcing that the market is ‘dysfunctional’.
They’ve decided that a whopping £225m per year is added on to drivers’ premiums each year through artificially high car hire and repair charges and they’re planning to stamp it out. The accusation is about the relationship between insurance companies and garages regarding the cost of repairs and supply of courtesy cars.
Basically, when a claim is made, the insurer of the "at-fault" driver normally has to pay for repairs and temporary car hire for the other driver in the accident. The OFT are alleging that these costs are pumped up by the insurer of the "not-at-fault" driver arranging artificially expensive car hire deals and repairs, in return for a tidy payment from the car hire firm or garage involved. All in all, it’s a diabolical set of circumstances, where the only loser is us, the poor, innocent consumer.
The OFT has provisionally referred the car insurance industry to the Competitions Commission and a decision is expected in October.