Vehicle insurers might be causing an excessive rise in the price of insurance premiums by up to £225million per annum by taking advantage of revenue creating possibilities, a report conducted by the Office of Fair Trading (OFT) has discovered.
This is happening because the at-fault driver’s insurer has to pay out for repairs and substitute vehicles but does not have much control over who is commissioned to do the work or the amount it costs.
The OFT has suggested that drivers who are not at fault, increase the costing of the at-fault side by around £560 because the insurer refers drivers, who now have to wait for their car to be repaired, to credit hire businesses. These are not only expected to be paid excessive rates by the day for a substitute car but a referral fee has to be paid by them, which can be anything from £250 to £400 for each car rental and drivers are often in receipt of substitute vehicles for far longer than is absolutely necessary.
The price of repairs may also be up to £155 higher, because some of the insurers are receiving rebates and referral fees from car repairers, paint retailers and parts retailers, and some insurers often agree to allow repairers to charge inflated labour rates after repairing the not-at-fault drivers’ vehicles.
The report published last week has made a suggestion that the private vehicle insurance business should be referred to the Competition Commission and, in October, they will be confirming their intention.
Road traffic accident supervisor, Charlotte Hardie, who is employed at Glaisyers Solicitors, said that this particular outcome of the OFT study has revealed that the facts surrounding personal injury fees are not just the sole problem.
Ms Hardie stated that making a general terms agreement between the Association of British Insurers’ (ABI), which is a voluntary agreement between hire companies and insurers to agree rental costs in advance, especially if this becomes compulsory, may lower premiums.
Karl Tonks, the current president of the Association of Personal Injury Lawyers (APIL) responded by saying that for years now the insurance industry has gone out of its way to put blame on anything or anyone it can without highlighting its own role in the constant hiking up of insurance premiums.
The ABI managing director of general insurance, Nick Starling, does accept the general thrust of OFT report and says that the regulating of all parties in this situation of overly exorbitant costs is long overdue. In addition, he hopes that the Competition Commission will assist in reforming the whole industry, which will bring down insurance premiums for users.