The UK’s insurance market for auto insurance has been referred to the Competition Commission for investigation. The Office of Fair Trading (OFT), which made the referral, expressed concerns that the structure of the market resulted in excessive costs and that premiums were set at too high a level.
Of particular concern is the situation whereby the insurers of motorists, found to be “at fault,” for causing an accident have no control over the amount spent for repairs or replacement vehicles by “not-at-fault” drivers.
The OFT concluded after a preliminary investigation of the £9.4 billion [app. $15.3 billion] auto insurance market that it required further in depth study; therefore it referred the matter to the Commission, which has two years to investigate and report.
The Association of British Insurers (ABI) responded promptly to the decision. Nick Starling, the ABI’s Director of General Insurance, commented: “The ABI welcomes today’s announcement by the OFT that it is referring the private motor insurance market and related goods or services to the Competition Commission for investigation.
“The OFT found what insurers have known for years – that when a customer has a crash that is their fault, the insurer has little control over the cost of the subsequent claim. In particular, for too long insurers have faced inflated rates for credit hire [rental] cars and excessive hire periods which have led to higher insurance premiums for customers.
“Regulation of all players in the market to tackle excessive costs is needed, and we look forward to working with the Competition Commission to bring much needed reforms to the market that will, in turn, result in lower car insurance premiums for consumers.”
Sources: News Reports and the Association of British Insurers
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