The Office for Fair Trading wants an investigation into the car insurance industry, focusing on claims that the market prevents, restricts and distorts competition.
The OFT has referred the UK’s private motor insurance industry to the Competition Commission in order to investigate concerns raised in May about how the market is treating motorists.
A market study conducted earlier in the year found that there were grounds to believe that the industry was preventing, restricting or in some cases distorting competition.
The report found that insurance companies acting on behalf of the ‘at-fault’ driver had little control over repairs and replacement vehicles for the ‘not-at-fault’ driver.
This raised concerns that the parties acting for the not-at-fault driver (like the insurers, credit hire organisations and garages) were involved in practices that resulted in higher than usual costs after an accident that were passed onto the insurers of the at-fault driver.
It is feared that the result of this practice is increased costs for insurers which are passed on to motorists in the form of higher premiums.
For an example of one case that went through the High Court read: Why car insurance premiums will jump 25%.
After a public consultation where people were invited to submit their views, the Office for Fair Trading has decided that a "more-in-depth investigation by the Competition Commission" is warranted.
However, a verdict could take a while. The Competition Commission has up to two years to report on its findings. But if the body finds that practices within the motor insurance market are harming competition, it has the power to put a stop to it.
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