A British antitrust regulator is widening a probe into the U.K. car insurance market by studying firms that repair and replace vehicles after being involved in road accidents.
The Office of Fair Trading has “reasonable grounds” to suspect that those parts of the U.K.’s private motor insurance market distort competition and inflate costs that are passed on to consumers, the London-based agency said in a statement today. The study follows two months of gathering evidence, and its findings will be published by the first half of next year, it said.
“Our concerns relate to the provision of third-party vehicle repairs and credit-hire replacement vehicles to claimants,” Sonya Branch, a senior director at the OFT, said in the statement. “We suspect companies may be competing to extract money from each other rather than keeping premiums as low as possible and providing car owners with value for money.”
Motor insurance premiums rose 40 percent in the 12 months through March following soaring claims costs and rising fraud, according to the Automobile Association Ltd. The average U.K. premium is 921 pounds ($1,425), according to the association. Insurers have helped fuel these costs by selling clients’ information to no-win, no-fee lawyers, garages and car-rental firms, bumping up costs for insurance companies and customers.
Insurers responsible for paying the claims following an accident have “limited control” over the vehicle repair and replacement firms and have difficulty assessing the validity of costs, the OFT said. Brokers, insurers and car-rental firms may be inflating these costs, which result in higher premiums for consumers, the watchdog said.
Royal Bank of Scotland Group Plc (RBS), Aviva Plc and Liverpool Victoria Friendly Society Ltd. are the three biggest U.K. auto insurers based on revenue in 2010, according to the Association of British Insurers.
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