Investigations by the Competition Commission have found that the £11 billion private motor insurance market is not working well for motoristsThe Commission found that insurer activities resulted in higher insurance premiums for the consumer due to a complex chain for the settlement of non-fault claims. It also stated that parties managing non-fault claims were focused on ‘earning a rent’ from the control of claims.
Alasdair Smith, chair of the investigation group that released the findings and deputy chair of theCompetition Commission, said: ‘We are now considering a range of possible measures, some of them far-reaching reforms, to ensure that the market serves the interests of customers.’
Smith added: ‘In most cases, the party managing the accident claim, typically a non-fault insurer or intermediary, is not the party liable to pay the costs of the claim. There is insufficient incentive for insurers to keep costs down even though they are themselves on the receiving end of the problem.’
This latter point is highlighted in the report which describes anti-competitive problems with contracts between
insurers and price comparison websites, meaning premiums could not be offered cheaper elsewhere. Issues with substandard repairs to vehicles, limited information about ‘add-on’ insurance products and their high cost, and the separation between control and liability are all resulting in higher costs for repairs and replacement cars.
Identifying the problem is only the first stage, and the investigation group also published a notice of
possible remedies.
The Association of Personal Injury Lawyer's (APIL) has prepared a response and highlighted the fact that the insurance industry has been fuelling the perception that personal injury claims are to blame for rising premiums as part of its long-term agenda to cut lawyers out of the road traffic accident claims process.
APIL also suggested that sanctions regulated by the Financial Conduct Authority should be considered whereinsurers fail to provide claimants with a clear understanding of their legal entitlements. Customers must
be fully informed of their rights from the inception of the insurance policy through to the end of any claim.
