The Office of Fair Trading has recently announced it will be starting investigative proceedings on rapidly rising car insurance rates in the UK as official figures indicate a 21 per cent increase of insurance premium prices over the last two years.
The trade watchdog also discovered that from 2009 to 2010, car insurance companies raised rates by 12 per cent alone. During the 2010-2011 financial year, insurers raised rates an additional 9 per cent in the first, second, and third quarters, the OFT reported as well.
The discount car insurance industry has blamed rate hikes on increased costs due to rising car accident claims in which motorists or their passengers suffered injury. However, an investigation by the OFT will also examine the costs associated with third party vehicle repairs, credit hire replacement cars, and other third party non-injury claims.
The trade watchdog felt that there were ‘reasonable grounds’ for suspicion that the private car insurance market in the UK has been restricting and distorting competition in regards to credit hire replacement vehicles and third party vehicle repairs provided to claimants. The OFT also expressed concern over the referral fee system set up by third parties in order to funnel cash to insurers for giving up personal details of its customers who have been involved in accidents and may find themselves in need of vehicle repairs or a car hire firm.
Services, infrastructure, and public markets senior director for the OFT, Sonya Branch, remarked that the watchdog has suspicions that firms may be in competition to extract cash from one another instead of keeping premium prices as low as possible in order to provide their customers with value for money.