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Car insurers scrutinised over competition

Date: 25 October 2012   |   Author: Rachel Burgess

Members of the fleet industry have backed the decision from the Office of Fair Trading to refer the UK's private motor insurance market to the Competition Commission over concerns it is not working well for motorists.

The BVRLA believes the increasing cost of motor insurance is the biggest threat to the profitability and sustainability of the vehicle rental industry.

"It is disappointing that politicians and the OFT have had to get involved to improve the competition in the sector, which could have got its own house in order," said the association's chief executive, John Lewis.

"We believe insurance companies should take greater control of vehicle downtime and costs to manage claims effectively.

"A credit hire organisation will simply provide a car for as long as one is needed to help the not-at-fault car owner. One solution could be to provide a courtesy car as standard for all policy holders."

Meanwhile, Andrew Moody, managing director of Retail Motor Law welcomed the announcement, proclaiming it "good news for small businesses".

He added that after some research, "it is hard to escape the conclusion that some major operators are throwing their weight around, inflating prices to the detriment of smaller companies and, ultimately, increasing costs to the motoring public via higher premiums".

An OFT market study found that insurers of drivers responsible for an accident appear to have little control over the way repairs and replacement vehicles are provided to the 'not-at-fault' driver and, as a result, the cost of these practices are higher than they might otherwise be.

Following this, the OFT has now referred the industry to the commission on the grounds that there are features of the market that prevent, restrict or distort competition.

OFT Chief Executive Clive Maxwell said: "Competition appears not to be working effectively in the private motor insurance market.

"The insurers of at-fault drivers appear to have little control over the bills they must pay, and this may be leading to higher costs for them and ultimately higher premiums for motorists."

The Competition Commission has up to two years to report its findings.

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