What the OFT 3? Market study on the cards

The office of fair trading, having digested much of the information that they have collated following calls from all courts that domestic and commercial vehicle insurance policies have unjustly risen in the last 12-18 months, insist that there is more to investigate before making a decision.

The Association of British Insurers has prepared their defence, citing fraudulent or staged accidents, no-win/no-fee personal injury claims and the rising role played by comparison websites prior to the car and van insurance premium rises as the justification.

The OFT have been looking into the depth of relationships with third party associations in the processing of claims and what components constitute a standard van insurance policy and which are bolt-ons that perhaps ought to be compulsory, not ancillary products.

The first aspect that will be investigated as a result of the initial proceedings is indeed the special relationship between vehicle insurance brokers and beneficiaries of them awarding a claim. These are the nominated mechanics who may carry out repairs deigned necessary or rental companies to whom van drivers are directed when they make a successful claim against their van insurance policy and are granted the use of a courtesy car for the duration of said repairs.

The issue, as we understand it here at cheapvaninsurance.co.uk, is whether some or all of any potential or realised costs are being passed on the driver seeking cover at the point of the van insurance renewal.

The subsequent investigation will take the format of a market study designed to get to the bottom of why, when inflation has fluctuated between 3% and 5%, vehicle insurance premiums have risen by 12% between 2009/10 and 9% year to date in 2011.

A spokesperson for the Office of Fair Trading, Sonya Branch, has spelt out, in no uncertain terms what the study is aiming to achieve. She is on record as stating, “By carrying out a market study, we aim to clarify whether a market investigation with reference to the Competition Commission is appropriate.”

With any mention of the Competition Commission one immediately looks to signs of impropriety. Should this be proved, how far will its tendrils spread down the supply chain? The last thing the consumer wants is for the investigation to throw circumstances into the mix that may keep the price of van insurance down, only to find costs rise elsewhere in the chain that means they are no better off.

We will find out soon enough, as the results will be made public in Spring 2012.

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