The Office of Fair Trading (OFT) is calling on the UKâ€™sÂ motor insurance providers to make their business more transparent, and is considering referring the industry for investigation by the Competition Commission.
The OFT says that insurers present the idea to motorists that it doesnâ€™t matter where their vehicle is repaired, when in fact evidence shows that the dysfunctional methods used by some insurers could be driving premiums up by as much as Â£225 million.
The government body found that insurers of at-fault drivers have very little influence over where a vehicle is repaired, meaning that mediating companies like brokers and credit hire organizations can dictate repair methods which drives up insurance bills.
Of particular worry to the aftermarket is the news that certain insurers receive referral payments and rebates by using approved repairers and parts suppliers. It is the cost of paying these rebates that can push up the cost of a repair for consumers.
The report has also found that certain insurers have agreements with garages to charge high labour rates to the customer, increasing bills for the consumer and profits for the repairer.
It is considering asking the Competition Commission to investigate and take appropriate action, something which could break the chain between motorists and insurer and allow more crash repair work to reach independents.
Evidence has also been found showing that insurers of not-at-fault drivers are referring drivers to credit hire organizations that charge much higher than normal daily rates, making repair bills on average Â£560 more expensive each time.
Not-at-fault drivers are also being given replacement vehicles for much longer than is necessary, further increasing costs.
Chief Executive of the OFT John Fingleton said: â€œCompetition in this market does not appear to work well for drivers. We believe the focus that insurers have on Â the competitive edge through raising their rivalsâ€™ costs means that drivers pay more than they need to for their motor insurance policies.â€
Chair of the Transport Committee Louise Ellman MP said she agreed with the decision: “The OFT’s decision is a major step forward.
“Like the OFT, we found evidence to support the view that various features of the private motor insurance prevent, restrict or distort adequate competition in ways that do not deliver a fair deal to motorists.”
The OFT will make its decision later in the year.