Competition Commission to investigate motor insurers

The Competition Commission is to investigate the UK's private motor insurance market, the OFT has confirmed. The OFT provisionally decided to make the reference in May this year.

A spokesman for the OFT said a study had shown that the insurers of drivers responsible for an accident appeared to have little control over the way repairs and replacement vehicles were provided to the victim's insurers.

He said this might enable the victim's insurers 'and others such as insurance brokers, credit hire organisations and repairers' to engage in practices which appeared to result in the cost of replacement vehicles and vehicle repairs being 'higher than they might otherwise be.'

The spokesman said that, having considered the responses submitted during a consultation, the OFT continued to hold the view that there are 'reasonable grounds for suspecting that there are features of the market that prevent, restrict or distort competition'.

He went on: 'The Competition Commission has up to two years to report its findings. If it finds that features of a market are harming competition, it has powers to impose remedies to address the situation.'

Don Clarke, president of the Forum of Insurance Lawyers (FOIL), welcomed the reference and said the OFT was right to highlight the considerable cost of the third party property damage claims and the consequent additional cost to the consumer. 'In FOIL's view it is extremely important that the OFT has specifically referred the market for the supply or acquisition of private motor insurance and related goods or services in the UK, thus ensuring that the actions of all market participants (not just insurers) are included within the scope of the reference.

'By doing this the OFT will ensure that the credit hire market is placed under scrutiny in terms of both costs and practices.'

Susan Brown, director of claimant law firm Prolegal, said: 'It is good to see the insurance industry under the spotlight for once, as opposed to claimant injury lawyers who have taken a bombardment of accusations and blame from the insurance industry.

'It is rather a pity Jack Straw concentrated his energies on injury claims when he highlighted the dysfunctional nature of the motor insurance industry last year, because that is only a small part of the story, as this OFT referral shows.'