Car insurance premiums 'too high'Competition Commission report proposes reforms
17 December 2013
Motorists could be paying up to £200 million extra on their car insurance premiums due to complex claims processes, a new study has indicated.
The investigation, conducted by the Competition Commission (CC), also suggests that contracts between car insurers and price comparison websites are driving up costs.
Ambiguous methods of selling ‘add-on’ products, such as breakdown cover and courtesy cars, were also criticised.
In response to these findings, the CC has requested a number of 'far-reaching reforms' to help reduce premiums.
Complicated claims process in car insurance
The main problem highlighted in the report was the complex process for the settlement of non-fault car insurance claims.
In many cases, the insurer of the ‘non-fault’ driver arranges repairs, whilst the insurer of the ‘at-fault’ driver pays the bill. The report suggested that this model creates a longer, more expensive chain of interactions.
CC deputy chairman Alasdair Smith, who led the investigation, claimed that it also eliminates any incentive for insurers to keep repair costs down.
Mr Smith said: 'Our provisional view is that many drivers of the UK’s 25 million privately registered cars are footing the bill for unnecessary costs incurred during the claims process following an accident. These costs are initially borne by the insurers of at-fault drivers, but they feed through into car insurance premiums for all drivers.'
The CC will now investigate the benefits of smoothing out the claims process, either by allowing a driver’s own insurer to book a replacement vehicle or by giving ‘at-fault’ insurers more opportunities to arrange repairs.
Crackdown on insurance comparison websites
The report argued that price-parity agreements between insurers and comparison websites were anti-competitive and called for them to be prohibited.
It also appealed for consumers to be provided with clearer information about ‘add-on’ products, which it was claimed are often sold at inflated prices by insurers with a point-of-sale advantage.
Other suggested actions included caps on the costs of repairs and replacement vehicles, as well as compulsory audits on the quality of repairs.
'We are now considering a range of possible measures, some of them far-reaching reforms, to ensure that the market better serves the interests of customers,' Smith concluded.