The Office of Fair Trading has referred the UK motor insurance market for a review by the Competition Commission which could take up to two years.
Nick Starling, ABI’s director of General Insurance, comments
"The ABI welcomes the announcement. The OFT found what insurers have known for years-that when a customer has a crash that is their fault, the insurer has little control over the cost of the subsequent claim. 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."
Karl Murphy, UK Property and Casualty Insurance Practice Leader, Towers Watson, comments “Hopefully, the Competition Commission will take a rounded view of how the motor insurance industry operates. Large parts of the industry recognise that some of the practices around referrals and repairs need reform but we would hope that the investigation will also throw weight behind measures to protect policyholders from other factors that inflate premiums, such as the rising tide of whiplash claims–which are far higher in the UK as a proportion of accidents than anywhere else in Europe. We would also urge the Government to push forward with the legislation that has arisen out of the Jackson Review, some of which addresses the issues highlighted by the Office of Fair Trading.”
Insurance Newslink comments: The UK motor insurance market is certainly in need of an in-depth review of practices that have grown over a number of years.
The timing is interesting with Royal Bank of Scotland about to begin its first IPO of Direct Line Group-likely to value the insurer at betwen £2.4/2.9bn. Meanwhile, the imminent European gender-neutral legislation and the surge in telematics could also have a major impact on pricing for the consumer.
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