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Tuesday, 5 June 2012

OFT to refer car insurance market to Competition Commission

And not before time, you might say. The Press Release can be read here if you want all the gory details. The OFT reckons that competition in the market is "dysfunctional", and although there's nothing in the legislation expressly outlawing dysfunctional competition (which might just be a trendy alternative to a boring but legally correct expression) it is pretty clear that there's something not right. Having carried out a market investigation, the OFT has decided that there are features of the market that restrict, distort or prevent competition, and as no quick fix can be identified it proposes to refer the matter to the Competition Commision.

The problems arise from the way that, after an accident, the not-at-fault driver's insurers are in the driving seat. This opens up all sorts of possibilities for brokers, credit hire organisations and repairers, to take advantage of this lack of control and generate revenues through rebates and referral fees. The result is inflated costs forinsurers of at-fault drivers. This, the OFT says, "is an inefficient way for the sector to operate, raising the total costs for providing private motor insurance which drivers end up paying." It reckons that it might be better if competition were based on the quality and value of the service provided to insurance companies' clients, not on trying to load costs onto the competition to make them put their rates up. And who can argue with that, if it's a fair summary of what's going on?


  1. Thanks for sharing great information. Your report suggested that this was the result of collusion between car insurance providers and the garages and suppliers which carry out the work.

    motor car insurance

  2. Sagar, I didn't intend this to suggest that collusion was taking place - as I understand it, the Office of Fair Trading merely feels that the market is not working as it should. That's not to say there is no collusion, just that it is not the issue here.