Car insurance companies are inflating repair and car hire costs that are adding up to £200 million a year to the cost of cover for drivers each year. An investigation by the Competition Commission revealed that insurers over-egg the no-fault claims procedure for motorists.In most claims, the not at fault driver arranges repairs, while the insurer of the driver to blame for the damage foots the bill.
The report suggested the arrangements between insurers adds time and costs to sorting out claims.
One of the main issues is the not at fault insurer can set a higher repair or replacement car cost for the other company than they would pay direct, which inflates the claim value, which is passed on to motorists as a higher premium.
The report also criticised car insurance comparison sites because insurers can manipulate the prices of policies and add-ons that stops the web sites competing effectively against each other on cost.
The commission wants the market to reform so motorists get a fairer deal out of car insurance with cheaper cover.
Commission deputy chairman Alasdair Smith, who led the investigation, claimed the current claims process stops insurers from limiting repair costs.
“’Our provisional view is that many drivers of the UK’s 25 million privately registered cars are footing the bill for unnecessary costs incurred during the claims process following an accident. These costs are initially borne by the insurers of at-fault drivers, but they feed through into car insurance premiums for all drivers,” he said.
The commission is looking at a range of solutions to bring down the cost of claims, which could include a cap on charges insurance companies can make for repairs and replacement car hire.
“We are now considering a range of possible measures, some of them far-reaching reforms, to ensure that the market better serves the interests of customers,” he added.