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Insurers to be investigated by Competition Commission after being found to ‘inflate’ prices

For years now there has been plenty of ‘finger wagging’ at Solicitors due to the fact that private motor insurance premiums payable by UK motorists have risen considerably. Solicitors have long taken the brunt of criticism regarding insurance premium increases, with an increase in whiplash and car accident claims being blamed for causing the rise in costs. However, a recent investigation, carried out by the OFT, has concluded that the motor insurers market is ‘dysfunctional’ and ‘inefficient’ and competition between firms is actually forcing British drivers to pay more. 

The OFT (Office of Fair Trading) focused their investigation into private motor insurance in the UK on the provision of third party vehicle repairs and credit hire vehicles to drivers involved in accidents. They found that the ‘dysfunctional’ competition in the car insurance market pushes up premiums by £225m a year.

Motor insurers have been found to be colluding with vehicle hire companies, repair firms and car part suppliers to beef up charges.  As a result, motorists are forced to pay higher premiums as companies attempt to claw back rising costs. 

Following their investigations, the OFT will refer the dispute to the Competition Commission, which could then force insurers and their suppliers to play fair with motorists.  They have also found that half of the problems are the referral fees and rebates that replacement car suppliers pay to insurers to get business from them.  There is a proposed ban on referral fees from solicitors which is due to commence April 2013.  Surely such a ban has to be extended to insurance companies. 

The insurance industry has continually blamed the legal profession for being a main course in the rise of insurance premiums.  However, as is evident from the findings by the OFT, the insurance industry need to place their own house in order first, before playing the ‘blame game’.

By Des Draper, Personal Injury Solicitor

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