Motor Insurance Industry Watches and Waits

With the date now passed when individuals or organisations can register their experiences of the UK car insurance industry with the Office of Fair Trading (OFT), motorhome insurance providers along with the rest of the motor insurance industry will have to wait and see what the OFT’s referral of the industry to the Competition Committee brings.

It is little wonder the industry has at last shown up on the OFT’s radar, as millions of words in newspaper columns and TV news programmes have been devoted to horror stories involving the cost of motor insurance. In fact the OFT referred the private vehicle insurance trade to the Competition Committee saying they believe that certain factors in the industry compete in a “dysfunctional way”. They were probably influenced by figures such as those revealed by the latest British Insurance Premium Index which shows the average price of a third party fire and theft motor insurance policy is now just under £2,000 (£1,959). Incredibly the same index shows that young males aged between 17-22 are now paying on average £4,170 a year, which must be in many cases more expensive than the vehicle they are insuring.

The OFT investigation along with that of the House of Commons Transport Select Committee was highly critical in the way that the insurance companies of at-fault drivers had little control over the costs of the insurance claim, with the OFT’s Chief Executive, John Fingleton, summing up the investigation by saying “Competition in this market does not appear to work well for drivers. We believe the focus that insurers have on gaining the competitive edge through raising their rivals’ costs means drivers pay more than they need to for their motor insurance policies. There doesn’t appear to be an appropriate quick fix to these problems. We have provisionally decided a more in-depth investigation by the Competition Commission may be necessary.”

However, many in the industry will be hoping the sector gets a chance to defend itself, and will certainly point to initiatives by some insurers to bring down the costs of insurance for young drivers by fitting a telematics device in the car. These will monitor the driving habits of the motorist and reward good driving with smaller insurance premiums. A spokesman for the Association of British Insurers (ABI) welcomed the report saying the ABI hoped the Competition Committee’s investigation would lead to smaller premiums for the UK consumer.

Leave a Reply

Your email address will not be published. Required fields are marked *