Finally, we hope, insurance companies are to face the government’s competition watchdog over their oft-quoted claims that inflated motor premiums have nothing whatsoever to do with their business practices.
Really? Do they think we are THAT stupid?
At last a government department has blown their cover and published what everyone, barring Jack Straw and chums, knows to be true:
Insurance companies ARE taking advantage of the system to inflate premiums for drivers by £225m a year, the Office of Fair Trading (OFT) reports today.
The competition watchdog says that after a road traffic accident, insurers of the not-at-fault driver and others, such as brokers, credit hire organisations and repairers, exploit a lack of control in the current system. They charge referral fees for using expensive hire organisations and then add to the cost by replacing the car for longer than is necessary.
The OFT has provisionally decided to refer the private motor insurance market to the Competition Commission after finding evidence that firms are competing in a ‘dysfunctional way’.
The report states that the government has focused its attention on reducing the cost of personal injury claims, but without intervention in the cost of replacement vehicles and repairs, artificially-inflated premiums are ‘likely to persist’.
Exactly. Three cheers and due credit for a chink of light in a tunnel of darkness and despond…
John Fingleton, chief executive of the OFT, said:
‘Competition in this market does not appear to work well for drivers. 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.
‘Because insurers are distracted from competing primarily on the quality and value of service provided to insured drivers, incentives for greater efficiency may be reduced.’
Donna Scully, chairman of the Motor Accident Solicitors’ Society (MASS), said the scale of the problem could be ‘immense’ once it is fully investigated.
‘Money is clearly being made from consumers behind their backs and MASS would welcome full disclosure of specific fee income on every case so that the consumer is fully informed,’ she said.
It is no wonder the whole sector has fallen into disrepute and that consumers are so wary of everyone who operates in it, and frustrated by exploitative practices they are likely to encounter when they make a claim.’
The Association of British Insurers welcomed the report – hmm, doubt that – but declined to address the accusations over its members receiving referral fees from credit hire companies.
Now THAT we believe…
Nick Starling, director general of the ABI, said: ‘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.
AND THERE WE HAVE IT.
WEASEL WORDS FROM THE ‘WRONGED’.
INCREDIBLE AS IT MAY SEEM, AFTER YEARS OF VILIFYING ROAD TRAFFIC ACCIDENT VICTIMS AND PERSONAL INJURY SOLICITORS, THE INSURERS ARE NOW SEEKING TO BLAME THE CREDIT HIRE AGENCIES AND VEHICLE REPAIR COMPANIES FOR THE RISE IN PREMIUMS.
Soon there will be nobody else left to blame and what then Nick?
Karl Tonks, president of the Association of Persosanl Injury Lawyers (APIL) commented:
‘For years the insurance industry has sought to blame anyone and anything but itself and its own sharp practices for high insurance premiums. Legal costs for compensation claims were slashed two years ago for this very reason, but premiums remained sky high.’
The OFT expects to reach a final decision by October 2012.
In our opinion it can’t come soon enough.