Competition Commission Rule Car Insurance Premiums Too High
The Competition Commission has said that car insurance premiums are too high, and unnecessarily so. The private motor insurance market is worth £11bn and following a referral from the Office of Fair Trading, the Commission has been studying it and has agreed that the system is not working.
The Commission has stated that premiums at the higher end of the scale are the result of courtesy cars and repairs which are paid for by the insurers of the motorists at fault. Premiums can be pushed up when drivers’ at fault insurers foot the bill for replacement cars or repairs and the Commission said:
“This separation of control and liability creates a chain of interactions which result in higher costs for replacement cars and for repairs being passed on to at-fault insurers,”
These concerns, including ones raised around how difficult motorists find trying to find the best value for products, affect drivers of 25 million registered vehicles in the United Kingdom. The Commission are now in the process of considering methods to tackle these issues and will be issuing a final report in September of this year.
Some of the options they propose include allowing the at-fault driver’s insurer to manage the claim, or imposing a cap on replacement vehicle costs. They also suggest that not-at-fault driver’s insurers become responsible for providing replacement vehicles. If changes were implemented, The Commission claim that drivers could save up to £6 to £8 in their premiums.
However, some organisations have criticised the proposed changes, highlighting that the high cost of premiums, especially with regards at-fault drivers are a result of the UK legal system. Martin Andrews, who is the director of the Credit Hire Organisation, stated: “Premiums need to come down, but not at the erosion of the legal rights of motorists who are in accidents that aren’t their fault.”
There are worries that placing the responsibility for providing replacement vehicles in the hands of not-at-fault drivers’ insurers will not work. These insurance companies do not have an incentive to provide such a service, and may attempt to talk the driver out of one, by making them believe that they are not entitled to the service.
The Commission will release a final report in September 2014, and when they do, it will become much clearer as to what the future of our car premiums might look like.
We contacted Stephen Jury, spokesperson for Motors.co.uk to see what he had to say “It’s important for companies to realise that consumers are getting savvier when it comes to recognising what is and isn’t acceptable in terms of car insurance. For careful drivers that do everything they can to remain safe on the roads high rates are simply unacceptable especially when people are not at fault when it comes to an accident. Something needs to be done so consumers feel like insurance cover is available at a reasonable cost.