Car insurance premiums may be rising because of the costs insurance companies charge each other for repairs to third-party vehicles and replacement courtesy cars, according to evidence uncovered by the Office of Fair Trading (OFT).
The OFT says it will launch a study into this area of insurance to clarify what goes on behind the scenes and to see if these costs are passed on to the consumer.
In September, the OFT began an inquiry into rising car insurance costs, looking into the reasons why insurance premiums were rising so fast. The decision to launch today's market study is in response to that inquiry.
The OFT says motor insurance premiums rose by 12% between 2009 and 2010 and by a further 9% in the first nine months of this year.
Sonya Branch of the OFT said: 'By carrying out a market study, we aim to clarify whether a market investigation reference to the Competition Commission is appropriate.'
The findings of the market study will be published next spring.