OFT takes closer look at insurance market

Insurance adjusterThe car and van insurance market is under the scrutiny of the Office of Fair Trading (OFT) after premiums have risen year on year well above the cost of inflation. Official statistics show that insurance premiums rose by 12 per cent between 2009 and 2010, and then by a further 9 per cent at the start of 2011. The reason for the price rise is in no small part down to insurers inflating the costs of providing replacement vehicles.

After initial investigations the OFT has referred the matter to the Competition Commission, which will look a lot more closely at the behaviour of insurers. It is estimated that the price hike resulting from the inflated costs of repairs and hire vehicles is costing British motorists £225m extra every year in car and van insurance premiums.

The conclusions reached thus far have shown that a large part of the increase comes as a result of insurers exaggerating the costs of providing replacement vehicles to not-at-fault drivers who have been involved in an accident. There are cases where the cost has been inflated by £1,000 more than the going rate.

John Fingleton, chief executive of the OFT, said: “Competition in this market does not seem to be working well for drivers. We believe that the focus insurers have on gaining the competitive edge through raising the costs of their rivals is causing drivers to pay more than they need to in insurance premiums.”

In response to the OFT’s claims, the Association of British Insurers welcomed the investigation. “For too long insurers have faced inflated rates for credit hire cars and excessive hire periods which have led to disproportionate insurance premiums for customers. Regulation of all players in the market to tackle excessive costs is needed.”

ConstructaQuote work tirelessly to find you the cheapest car and van insurance quotes we can. With costs of insurance on the rise, not to mention fuel, we act as an important resource allowing you to compare the prices of leading UK insurers against one another to find the very best deal.

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About ElWood

Hi readers, Elwood here, business guru and founder of ConstructaQuote.com. I have created this blog to keep my readers up to date with the latest business news, information and advice.
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