The car insurance market in the UK is under the spotlight after the Office of Fair Trading described it as: “dysfunctional”.
It points to high car hire and repair charges, which are said to add around £225million a year to drivers’ premiums: and now it wants the Competition Commission to investigate the sector, suggesting that some insurers are working with garages and courtesy car suppliers allowing them to charge excessive prices.
Why premiums are so high
According to the OFT, competition in the marketplace is not working as favourably for consumers as it should – with drivers bearing the cost of inflated hire car rates and excessive hire periods.
There is concern too that the charges from repair shops and car hire firms are not the worst of the problem. Instead, personal injury claims have a far larger impact on the size of premiums with an epidemic of whiplash claims on its own, adding nine times as much to car insurance premiums as the issues raised by the OFT.
However, it is hoped that this investigation will, at least, cast some light on the fees paid to insurers in order to get hold of contact details for accident victims. It is believed that some insurers have been receiving money from companies to ensure that their services are used – even at an inflated price.
The OFT’s investigation into repair costs and car hire vehicles actually began last September and followed exposure of a covert system of referral fees – with insurers adjudged to effectively increase claims to drive premiums higher. To achieve this, it is alleged that some have been selling details of policyholders’ accidents on to solicitors – who will then encourage drivers to seek damages, such as for whiplash.
What can be done?
There are steps that drivers can take to minimise insurance costs while they wait on the Competition Commission to take action against insurers.
The first is to ensure they are getting the best deal possible by taking advantage of the competitive marketplace and using comparison websites to find the best available deals. They should also look into insurance voucher codes, which may potentially offer significant discounts on policies. In addition, they should look to minimise the “risk” they pose to insurers: such as by driving older vehicles that are less likely to be targeted by thieves; increasing the security of their car; agreeing to mileage limits; parking in a locked garage overnight; and limiting the number of named drivers on their policies.