Drivers 'pay £200m too much' for car insurance

  • Competition Commission investigates cost of insurance
  • Complex settlement process is a key culprit
  • Report also questions quality of post-accident repair work

British drivers are paying up to £200 million a year too much for car insurance, the Competition Commission has announced.

The biggest cost escalator, said the commission, is that the insurance company for an at-fault driver has to pay for replacement vehicles and repairs for the innocent party in an incident, but has little or no control over the cost. This results in extra costs to car owners of between £150 million and £200 million every year.

The commission says insurance premiums have also been pushed up by unnecessarily complex settlement processes, add-ons such as breakdown cover or physiotherapy, poor-quality repairs, and blanket pricing across price-comparison websites.

Alasdair Smith, the Competition Commission's deputy chairman and chair of the private motor insurance investigation group, said: ‘Our provisional view is that many drivers are footing the bill for unnecessary costs incurred during the claims process.’

The commission is considering reforms, including:

  • making a driver’s own insurer responsible for providing a replacement vehicle
  • placing caps on the cost of replacement vehicles and repairs
  • clearer information for customers when comparing insurance add-ons
  • a ban on price-parity clauses on price-comparison websites.

It will also look at introducing compulsory audits of repair quality.

The Association of British Insurers welcomed the commission’s intention to make car insurance more transparent and more affordable but disputed the allegation of poor-quality repair work, as did the National Association of Bodyshops.

‘The commission’s findings are largely based on an analysis representing 0.001% of the 1 to 2 million vehicles insurers repair each year,’ said the ABI’s James Dalton. ‘This is a tiny sample size, and the findings are at odds with insurers’ own complaints data.’

The commission will publish its final report in September 2014.

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