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OFT orders car insurance probe

OFT orders car insurance probe

Category: Car insurance

Updated: 26/11/2012
First Published: 31/05/2012

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
The Office of Fair Trading (OFT) has ordered a probe into the car insurance market, after the regulator labelled it 'dysfunctional'.

The OFT said it had found evidence that insurers 'compete in a dysfunctional way' that may be pushing up premiums by as much as £225 million a year, with artificially high car hire and repair charges to blame.

It has ordered that the matter be investigated by the Competition Commission.

It found that the insurer of the 'not-at-fault' driver arrange for artificially high cost repairs and car hire in return for a fee.

This is causing the average car hire to be £560 more expensive, and the average repair cost to be inflated by an average of £155.

These costs are covered by the insurer of the 'at-fault driver' but the OFT thinks that the eventual costs are being passed on to consumers through higher car insurance premiums.

John Fingleton of the OFT said there was no 'quick fix' to the problem, which is why the problem has been referred to the Competition Commission.

"Competition in this market does not appear to work well for drivers," said John Fingleton, chief executive of the OFT.

"We believe the focus that insurers have on gaining the competitive edge through raising their rivals' costs means that drivers pay more than they need to for their motor insurance policies.

"Because insurers are distracted from competing primarily on the quality and value of service provided to insured drivers, incentives for greater efficiency may be reduced."

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