OFT chases after motor insurance industry with a big stick!
Office of Fair Trading is looking hard (really, really hard) at replacement vehicle, repair costs and referral fees following steep rise in premiums. That's right! The OFT is chasing the motor insurance industry with a broom handle and want to thwack it's behind!
The OFT has been collecting evidence thanks to continued rising prices, with some estimates putting the annual increase at 40%. They say that they're going to look at two areas in particular that they believe “restrict[s] and distort competition”.
The first area they want to investigate is the cost to insurers of third party claims for replacement vehicles and repairs. OFT think that insurers “appear to find it difficult to assess the extent to which the costs claimed are reasonable”. Secondly, they want to look at the practice of referral fees, with insurers, roadside assistance companies and garages all cited for selling off drivers’ details to claims management companies.
The Government have already announced a ban on referral fees in England and Wales, however, without thorough policing, there's a strong chance the whole thing won't work in practice. In addition to this, the OFT has asked for the help of the Financial Services Authority (FSA) to work with insurers to make insurance product information easier to understand.
The results of the OFT investigation are due in spring 2012.