Competition Commission Asked to Review Auto Insurance Practices
San Francisco, CA -- (SBWIRE) -- 10/30/2012 -- Insurance claims soar when hired cars are involved, according to a recent study by the Office of Fair Trading. Average insurance claims involving hired cars exceed those of normal claims by up to £500, the OFT claims.
These findings have been referred to the Competition Commission, who have been urged to look into the matter. The OFT does not believe that the considerable bump in claim cost has been caused by drivers, but is symptomatic of the “dysfunctional” makeup of the car insurance industry.
The report on the auto insurance market, a 9.2 billion euro industry, was completed in May of this year and, now after a public consultation, the OFT has elected to refer the matter to the Competition Commission. The Commission will have two years to compile a report of its own and weigh in on the matter separately.
Chief among the concerns raised by the OFT is that drivers who are found to be liable in accidents have little to no control over the cost of repairing or replacing the damaged vehicles involved.
The OFT report released this spring told of repairs to damaged vehicles being hired out for more money and more billable time than should have been required. The Office of Fair Trading found that repairs to hired cars were overbilled by £155, bringing the average cost to £560.
The report implicated insurers as well as hire firms and repair garages for artificially inflating the cost of repairs and padding their earnings with fees, costs and other premiums of £225 million per year.
The Association of British Insurers, ABI, says that they welcome the review and claim that the OFT has formally uncovered an issue that insurers have known for years - that claims made by at-fault drivers must contend with costs that are largely out of the hands of insurers.
ABI director of general insurance Nick Starling had this to say about the matter, “In particular, for too long insurers have faced inflated rates for credit hire cars and excessive hire periods, which have led to higher insurance premiums for customers.”
“Regulation of all players in the market to tackle excessive costs is needed, and we look forward to working with the Competition Commission to bring much needed reforms to the market that will, in turn, result in lower car insurance premiums for consumers.”
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