Car Insurance & the Competition Commission

As drivers we all hope to get a fair deal when it comes to buying our car insurance. With rising costs, car insurance cover is at the most expensive it has ever been. There are many  companies that specialise in car insurance while customers have so many to choose from that it can be very confusing in terms of what type of cover to buy and who with. The main thing is that drivers buy car insurance cover not only to protect themselves but other road users.

Why has the Car Insurance Industry been referred to the CC?

The OFT (Office of Fair Trading) has referred the car insurance industry to the Competition Commission . The OFT believes that it has reasonable grounds to suspect that features related to the markets for the supply of motor insurance and related services or goods in the UK restricts competition. In other words they do not believe that car insurance companies offer sufficient competition.

This state of affairs will make costs much higher while premiums will be unnecessarily high. One of the main findings is that companies who insure “at fault” drivers have no control when it comes to the amount of money spent on courtesy cars, replacement vehicles or repairs by “not at fault drivers”. With two years to report back the Competition Commission will have plenty of time to investigate these allegations thoroughly. As consumers we have to rely on their inquiries to result in a fair and honest outcome.

Does it Mean We Pay Higher Premiums?

The Office of Fair Trading has been investigating the situation, (including having public consultations), for some time now, concluding that the involvement of the Competition Commission was required. The car insurance market is worth around £9.4 billion in the UK alone which is a colossal amount. The supply of replacement vehicles at inflated prices and for longer periods of time than necessary, are two of the major concerns for the OFT.

The OFT stated that the average replacement car price was around £560 more expensive than it was required to be plus the cost of repairs was £155 more than they should be too. So why is this happening? It’s simple; insurers are receiving rewarding fees from garages or car hire companies in return for business, while the cost to the motorist is approximately £10 per policy. This doesn’t sound that much but when you consider how many car insurance policies are taken out per year it all adds up to an astonishing £225 million per year.

Motor insurance premiums rose by 12% between 2009 and 2010 plus a further 9% in 2011. The OFT states that insurers who raise their rivals costs through inflated car replacement costs means in the end it is the motorist that pays by the cost of higher premium prices.

Is the Investigation Welcome?

Yes it certainly is! Even the ABI (Association of British Insurers) has welcomed the move. It has long been a fact, as far as insurers are concerned, that when a policy holder crashes and is at fault the insurer has no control over how much the following claim will cost. Some sort of regulation will be welcomed where all insurers will work together so the end result will be that consumers will pay less for their premiums.

The Credit hire Organisation (CHO) insists however that car hire costs are soaring due to the escalation in whiplash claims. Not all whiplash claims are fraudulent but many are claims instigated by fraudsters who arrange crashes in order to make a claim. The CHO worry that by giving the insurers of “at fault” drivers more control they may try to avoid paying out for a hire car altogether so affecting their business. Their concern they say is for the “not at fault” driver and their access to mobility following an accident. As usual it is the innocent driver who ends up paying for the fraudsters.

What part have Insurers played in all this?

Last year a number of referrals fees were discovered where insurers inflated claims against themselves resulting in higher premiums for us all as drivers. Insurers sell the details of accidents involving their own policy holders to solicitors who encourage or persuade drivers to sue for injuries such as whiplash, which is a difficult injury to diagnose.

Will Motorists Benefit from the Investigation?

Experts are of the opinion that it will almost certainly impact on car insurance prices but not in the near future, it will take time. Premiums this year have fallen but not enough to make up for the sharp rises in preceding years. Until the Competition Commission come forward with their findings (they have two years to deliberate) prices will most likely continue to rise. This is not good news for motorists.

Women drivers will probably be hit the most next year in terms of cost as the EU Gender Directive becomes effective in January 2013. Insurers will no longer be able to give women cheaper insurance with the cost based on gender or the fact that they are a lower risk. I suppose ladies we all wish to see equality while in this case it is going to affect women financially.

All we can do now as motorists is wait to see what the findings of the Competition Commission will be. In the meantime it is advisable for all car owners to shop around to find the best policy to fit your individual needs. Further updates will be posted as and when any news is released.

Aviva – Aviva are one the biggest and most reputable car insurers in the UK. You won’t find their car insurance deals on comparison sites so you will have to go direct to get a quote.

Comparison websites offer great way to get multiple quotes quickly. Here are some links to the UK’s most well known and oft-used comparison sites where you will find car insurance quotes:

Compare the Market – Filling out one simple form on this site results in multiple quotes from the UK’s best providers. When you quote and buy online, you can get free plush meerkat toys as a gift.

Confused.com – If you’re part of the Nectar program this comparison site is for you. Earn 2,000 nectar points when you by online from one of more than 130 quoted providers.

Tesco Compare – Offers quotes from seven different car insurance carriers. When you buy online, you might be eligible for free key recovery service for up to 12 months.