Car insurance premiums are too high and the current insurance market is not working in favour of motorists, according to a recent investigation by the UK’s competition watchdog.
The Competition Commission is concerned by complex chain of payments for repairs and replacement cars between insurers of both parties following an accident, which adds in an estimated £150 million to £200 million onto motor insurance premiums each year.
Alasdair Smith who is leading the investigation said “In most cases, the party managing the accident claim, typically a non-fault insurer or intermediary, is not the party liable to pay the costs of the claim. There is insufficient incentive for insurers to keep costs down even though they are themselves on the receiving end of the problem.”
Worryingly, the investigation also found that “too many” repairs to vehicles were below the required standard following an accident. It was also concluded that the relationship between price comparison websites and insurers can reduce competition because some deals, known as price-parity contracts mean they have to offer the same rates on all comparison websites.
David Bott, Senior Partner at Bott and Co said “Insurers had mixed responses to the report, with James Dalton from the Association of British Insurers believing there are ‘fundamental flaws’ in the report. He said “The commission’s findings are largely based on an inspection report which contains fundamental flaws and is based on an analysis representing 0.001% of the 1 to 2 million vehicles insurers repair each year.”
The ABI did commend some of the recommendations made in the report, however, such as making the driver’s own insurer responsible for providing post-accident repairs. The report also recommended the capping of vehicle hire and repair costs, as well as prohibiting ‘wide’ parity clauses on price comparison websites. Mr Dalton added: “Today’s possible remedies are a further step along the road to getting a market that enables insurers to deliver fully for consumers.”