Drivers foot bill as car insurers pass on £200m in extra costs

Kate McCann
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THE PRIVATE motor insurance industry is passing between £150m and £200m in extra costs on to consumers every year, a report from the Competition Commission has found.

Gaps in the settlement process for non-fault claims, overcharging for hire cars and inadequate repairs are behind the rising premiums, according to the report. It also concludes that a form of price fixing agreement between price comparison websites and insurers, called most favoured nation clauses, reduce competition and lead to higher prices for consumers.

Alasdair Smith, Charity Commission deputy chairman and chair of the private motor insurance investigation group, said: “In most cases, the party managing the accident claim, typically a non-fault insurer or intermediary, is not the party liable to pay the costs of the claim. There is insufficient incentive for insurers to keep costs down even though they are themselves on the receiving end of the problem.” He added that a range of changes will be considered to reduce extra costs. Simon Douglas, director of AA Insurance, welcomed the report. “The motor insurance market is highly competitive and premiums are falling. Curbs to the high cost of personal injury claims and particularly whiplash injury, which account for up to £90 per policy, are already having an effect on premiums,” he said.