Competition Commission Rule Car Insurance Premiums Too High

car insurance1 Competition Commission Rule Car Insurance Premiums Too High

According to a new report by the Competition Commission insurance premiums are too high, echoing what many motorists have been saying for years. The Commission had studied the motor insurance industry for the whole of 2013 and came to the conclusion that the procedures employed by the £11 billion market are not working in the best interests of motorists.

So what are the findings of the Competition Commission?

The reasons for high insurance premiums

In a nutshell, the higher premiums are the result of the cost of repairs and courtesy cars, which are paid for by the insurers of the motorists at fault for the accidents. Ironically, it appears to be this separation of control and liability which – although designed to protect those not at fault for accidents – is the primary cause of extra premiums costs which lie in the region of £150-£200 million per year in the United Kingdom.

The results of high insurance premiums

Somewhat alarmingly, the Commission discovered that repairs were often done cheaply in order to minimise the overall costs.

Also uncovered, are the difficulties for motorists in trying to identify the best deals, due to there being limited information available with regard to add-on products. This problem is further compounded by the existence of ‘price-parity contracts’ between insurance companies and price comparison websites which mean that policies available through these websites are not available elsewhere.

In addition, the director-general of the Credit Hire Organisation, Martin Andrews, claims that insurance companies currently ‘have no incentive to provide a replacement car’ if their car needs repairs following an accident. Also he claims they can ‘easily bully’ drivers into believing that they are not entitled to a courtesy car while their own car is being repaired.

How will these issues be remedied?

Currently the Commission is considering the possibility of introducing compulsory repair audits, as well as more transparent information on comparison websites.

The cost of insurance could fall by between £6 and £8 per policy if such changes were made to the process of claiming insurance.

Also proposed are a possible maximum limit on the cost of replacement vehicles, or making the insurer of the driver not at a fault in a collision to pay for a replacement vehicle. These ideas have been met with consternation by the CHO – who represent companies that provide replacement vehicles. Martin Andrews claims that the Commission would effectively be eroding the rights of those in accidents for which they were not to blame, due to what he considers to be a focus ‘on the wrong target’.

We contacted a leading used car portal to see what they had to say – Stephen Jury, spokesperson for Motors.co.uk said

“It’s important for companies to realise that consumers are getting savvier when it comes to recognising what is and isn’t acceptable in terms of car insurance. For careful drivers that do everything they can to remain safe on the roads high rates are simply unacceptable especially when people are not at fault when it comes to an accident. Something needs to be done so consumers feel like insurance cover is available at a reasonable cost.”

photo credit: madelinewright via photopin cc

One thought on “Competition Commission Rule Car Insurance Premiums Too High”

  1. The Competition Commission came to the [stunning] conclusion that the insurance companies “aren’t working to working in the best interests of motorists”.

    I’m shocked. Shocked, I tell you…. that a Commission would be needed to uncover this ghastly fact. :-)

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>