'Motor insurance firms rely on inflated car hire and repair costs'

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.

The industry has tried to rely on revenue from the fees generated from referring personal accident claims to solicitors, inflating repair costs and hire car charges. Ultimately this strategy has come back to hit insurers hard as the cost of claims has risen rapidly; costs that have been passed on to customers.

She advised drivers to "shop around" until the Competition Commission reaches a decision on such practices.

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Car insurance firm market probe

The Office of Fair Trading (OFT) is to refer the private motor insurance market to the Competition Commission for practices that, it claims, drive up the cost of premiums.