- 13 updates
Clare Francis, head of content at MoneySupermarket, has said that insurers are resorting to dysfunctional practices because they don't make any real profit on the policies they sell.
She advised drivers to "shop around" until the Competition Commission reaches a decision on such practices.
Donna Scully, Chairman of the Motor Accident Solicitors’ Society (MASS), had this reaction to today's findings about the motor insurance industry:
The Association of British Insurers (ABI) has welcomed today's announcement by the Office of Fair Trading that it intends to refer the motor insurance market to the Competition Commission.
Nick Starling, the head of general insurance at the Association of British Insurers, has said he hopes the Competiton Commission will look into some of the "dysfunctional" practices in the motor industry. He told BBC Radio 4's Today programme:
When pressed on which issues needed resolving, he said that referral fees to insurers needed to be abolished. He also mentioned clamping down on excessive hire fees and ensuring that replacement vehicles are equivalent to the car that was damaged, not more expensive.
Here are some statistics from the Office of Fair Trading investigation into dysfunctional practices in the motor insurance industry:
- Practices cost insurers £225 million in 2011 - or £10 per policy for the consumer
- Insurers get "kickbacks" of £250-400 from credit hire firms
- Average cost of a courtesy car is £560 higher when the insurer of the not-at-fault driver chooses the supplier
- Average cost of repairs was £155 higher when the insurer of the not-at-fault driver is in charge
The Office of Fair Trading has found evidence that motor insurance firms are driving up the costs associated with having an accident.
Most of this is being done by the insurers of the driver who is not at fault, who earn fees by referring the driver to rip-off car hire firms, repairers and even paint suppliers. Here are some examples:
-Courtesy cars - drivers referred to rip-off car hire firms. Drivers keep courtesy cars for longer than necessary.
-Repair work - insurers earn fees from repairers, paint suppliers and parts suppliers for referring drivers. Some repairers charge rip-off labour rates.
Many of these extra costs are passed on the insurers of the driver who is at fault.
John Fingleton, the Chief Executive of the Office for Fair Trading, said:
Latest ITV News reports
A road crash can have big financial impact - but new evidence suggests the insurance firms meant to protect us, are adding to the costs.
"Dysfunctional" practices in the motor insurance industry are pushing up premiums by £225 million a year, despite attempts to blame drivers