Paying too much for car insurance?

It is illegal to drive without car insurance in the UK, making it one of life’s annoying little expenditures for all motorists. Whilst you have to pay for it, the question begs, are you paying too much?

The Office of Fair Trading (OFT) seems to think so; they recently lodged a complaint with the Competition Commission who will now dive into a full-scale investigation of the car insurance market for overly high premiums.

Car insurance is a hot topic, which has been under scrutiny for years as premiums continue to increase, especially for younger drivers. The OFT released a statement calling for a more in-depth investigation on 28 September, referring the issue to Competition Commission.

The OFT states there are ‘concerns that the market is not working well for motorists’ following their investigation, which was launched in September last year. The consumer watchdog provisionally decided to refer the market to the Competition Commission in May this year after a study that gave reasonable grounds for suspecting that aspects of the market were ‘dysfunctional.’

Now they are calling for a complete in-depth investigation into the car insurance industry after finding that at-fault drivers had very little control over the way in which repairs are carried out and replacement vehicles provided to not-at-fault drivers.

The findings revealed that these practices were pushing up premiums by as much as £10 per policy. The OFT claims that at-fault drivers are being taken advantage of by insurers of not-at-fault drivers. In addition, insurance brokers, credit hire organisations and repair costs for not-at-fault drivers are higher than they could be.

It is thought that overinflated costs of providing replacement vehicles is an average of £560 a time, while the cost of repairs was £155 more.

Clive Maxwell, OFT Chief Executive, said: “Competition appears not to be working effectively in the private motor insurance market. The insurers of at-fault drivers appear to have little control over the bills they must pay, and this may be leading to higher costs for them and ultimately higher premiums for motorists.

“Having publicly consulted on our provisional decision, we are still of the view that there is no quick fix to these problems, and that a more in-depth investigation by the Competition Commission is therefore appropriate.”

Labour’s Shadow Transport Minister, John Woodcock MP, believes this is a good move for motorists.

“With household budgets squeezed as rarely before, many families have been hit with eye-watering rises in their premiums,” he said.

“They need confidence that the insurance market is not penalising responsible drivers. Motorists across Britain will welcome the decision to refer the insurance industry to the Competition Commission.”

Despite the news that the industry will get a full-blown investigation, the results could take a long time to come out and even longer for reforms to be enforced. The Commission could take up to two years to report on its findings, which means that motorists will not see any cost-cutting policy legislation changes soon.

In fact the only insurance reform that comes into force soon is one that will push prices up further. Premiums have sky rocketed in the last few years and a new gender directive, which will come into force in December, will drastically change insurance premiums, especially for women.

EU Gender rules

From 21 December insurance companies will not be allowed to use gender as a factor to determine how much you pay. The EU regulation makes it illegal for gender discrimination, whether it’s positive or negative, to play a role in insurance premiums. This means that women, who typically enjoy lower premiums than men, will see their insurance pushed up to match their male counterparts. The majority of men will not see their premiums reduced to match the current level that women are paying.

Some men might see their premiums reduced, however they will largely see a slight rise as the cost of making these significant changes within the industry will have to be covered.

Figures show that women drivers could face premium increases of between £300 and £2,000 a year following the EU reform. Male drivers currently pay an average of £315 more than women, a staggering 41% more. Young female drivers in particular could see their premiums rise by as much as £2,000 which is a massive 94% increase, according to a price comparison website.

Compare car insurance with Propertywide.

avatar
Posted by: WarrenWilson Categories: Finance Tags: , Comments Off on Paying too much for car insurance?

Comments are closed.