Why are car insurance premiums so high? OFT to investigate

Thursday, 08 September 2011 11:01

The Office of Fair Trading (OFT) is to look into recent reports of rising UK motor insurance premiums to consider whether work is needed to improve the way the market works.

Evidence suggests premiums rose by 40 per cent in the year ending March 31st 2011 and the watchdog revealed it wants to establish the full facts and the reasons behind these reportedly higher prices.

In addition, the OFT said it needs to establish whether there are any consumer or competition issues that need to be addressed to improve the functioning of the market.

To conduct the study, the organisation is to consult insurers and others bodies for their views on a number of aspects, including the role of price comparison sites and the provision of credit hire replacement vehicles to drivers who are involved in accidents that are not their fault.

Insurance companies' use of panels of approved repairers will also be analysed, along with ancillary products sold by insurers in addition to standard motor insurance cover.

Commenting on the announcement, Association of British Insurers director general Otto Thoresen said the move will give motor insurers an opportunity to highlight the cost pressures they face and how they can be reduced.

"Rising claims costs from personal injury claims and excessive legal costs, insurance fraud and uninsured driving, coupled with lower investment returns in recent years, have unfortunately led to rising motor insurance bills for many customers. In fact the motor insurance industry has not been profitable for the last sixteen years," he added.

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