UK motor insurers artificially inflating costs

Posted 03/10/2012

The Office of Fair Trading (OFT) has announced that they have referred the UK motor insurance industry to the Competition Commission. This reflects their concerns that insurance premiums paid by drivers are being inflated by insurers who are deliberately driving up the costs of dealing with claims to gain a competitive edge over one another, as opposed to competing on quality and value of service.

It is understood that these inflated charges could be pushing premiums up by around £255 million a year, all of which finds its way into the coffers of the insurance industry. The cost is then passed on to the consumer through higher insurance premiums.

Back in May, John Fingleton, the (then) Chief Executive of the OFT, summarised the position when he said: “We believe the focus that insurers have on gaining the competitive edge through raising their rivals’ costs means that drivers pay more than they need to for their motor insurance policies.” He went on to say that “Competition in this market does not appear to work well for drivers.” Fast forward four months and Clive Maxwell, the current Chief Executive of the OFT, echoed precisely the same sentiments.

The Competition Commission now has two years to carry out its investigation and report back.

Tom Ranson of Ashtons Legal’s Injury Services team comments: “Such sharp practice within the industry has been rife for years at huge cost to the consumer. It is somewhat ironic that rather than get their own house in order, the insurers continue to take with both hands and look to blame everyone but themselves for the rise in insurance premiums”.