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The car insurance industry is facing a tough time as the Office of Fair Trading (OFT) has announced plans to launch a full-scale investigation over insurance premiums in the UK.
This comes after consumers and competition watchdogs labelled the car insurance market ‘ysfunctional' and said the nature of competition between insurers was pushing up premiums by as much as £225 million a year.
The OFT has announced plans to refer the case to the Competition Commission to review insurers' relationships with car hire companies to "prevent, restrict or distort competition.”
The car hire companies, who typically lend temporary cars to motorists who were involved in accidents where they were not at fault, are able to claim the expenses against the at-fault driver's insurance company.
However, the OFT revealed that the insurers of at-fault drivers have little control of how the repairs and replacement vehicle's services are carried out, which pushes up premiums.
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.”
"There does not appear to be an appropriate, quick fix to these problems. We have provisionally decided that a more in-depth investigation by the Competition Commission, which has a range of additional tools at its disposal, may be necessary.”
This is just a reflection of the UK car insurance market and does not involve car hire cover for overseas vehicles. Another system is in place for accidents which occur in a rented vehicle overseas and this is car hire excess insurance.
Compare overseas car hire and car hire excess insurance policies with MoneyMaxim.