Industry experts say that car and van insurance providers are responsible for running up £225 million in costs – that were passed along to motorists in the form of higher rates – due to ‘dysfunctional’ practices.
The entire market, personal and commercial van insurance providers alike, has been referred to the Competition Commission by the Office of Fair Trading after the OFT found that some companies were inflating the costs of repairs and replacement car parts following road traffic accidents. The watchdog agency remarked that the practice has is effectively holding insurers of at-fault drivers for ransom, depriving them any sort of choice in the way repair work is carried out.
Investigations found that the cost of providing a replacement vehicle was increased by around £560 for each instance. Repair costs were also found to b inflated by an additional £155 by insurers.
With drivers bearing the brunt of such actions through increased premium prices, consumer groups have praised the OFT’s announcement as an important first step in wrenching control away from a dysfunctional insurance system. The possibility now exists that a greater measure of transparency will be put in place in order to prevent the kind of complex and convoluted charges and fees that insurers have been using to drive up premium pricing, experts say.
Attempting to gain a competitive edge over their rivals by making it more expensive for competitors to do business is simply counter-productive, the OFT believes, adding that the market would work much more efficiently if insurance providers should simply concentrate their efforts on supplying high levels of service and quality to their customers.