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Car insurance is too high, say the Competition Commission

December 19, 2013

Car KeysMotor insurance is unnecessarily high for drivers due to the current system for claims1, the Competition Commission has said.

Following a referral from the Office of Fair Trading (OFT), the Competition Commission’s study was undertaken for more than a year and delved into the £11 billion private motor insurance industry. They found that premiums were hiked up because a vehicle repair or replacement is arranged by the insurer of the not-at-fault driver whilst the at-fault driver’s insurer pays the bill.

‘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,’ the Commission said.

‘The Commission estimates the extra premium costs to be between £150m and £200m a year’.

A final report will be published in September 2014 and they will now consider ways to improve the situation. Current suggestions include enforcing a cap on the cost of replacement vehicles, making the insurer of the not-at-fault driver responsible for replacing the motor, or having the insurer of the at-fault driver manage the claim.

Martin Andrews, the director general of the Credit Hire Organisation, believes the Commission are focusing on the wrong target.

‘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’, he states.

‘If these reforms go ahead, we're going to be back to the situation we were in 20 years ago when accident victims were forced to take the bus’.

Whilst most drivers are willing to fork out large insurance premiums for their vehicles, many overlook one of the most important yet cheapest types of cover: life insurance. Life insurance is considerably cheaper than car insurance, with policies costing from as little as £1 per week2, and could protect your home and your loved ones’ futures financially when you no longer can.

 


1www.bbc.co.uk ‘Car insurance premiums too high, Competition Commission says’, 17th December 2013 <http://www.bbc.co.uk/news/business-25403673>

2 Based on a 30 year old male, non-smoker, £65,000 over 10 years on a decreasing policy. Offer available with Ageas. Figures correct as of September 2013.

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