SHARES in motor insurer Admiral fell more than four per cent yesterday after the competition watchdog said it would probe whether motor insurance firms were inflating prices for fixing crashed cars yesterday.
The Office of Fair Trading said it was concerned that drivers paying for third-party repair claims and courtesy cars are charged too much and cannot change to cheaper providers.
Analysts said the probe – which comes alongside a government inquiry into personal injury claims and a ban on charging referral fees to claims management firms for selling customer data – would hurt Admiral more than other insurers.
“We believe that income from credit hire and legal expenses products are a major feature of [ancillary income] profit source for Admiral,” said Shore Capital analyst Eamonn Flanagan. “Such scrutiny and potential regulatory attention is likely to put downward pressure on this earnings stream.”
The probe follows a three-month OFT call for evidence into the market.
“We suspect companies may be competing to extract money from each other rather than keeping premiums as low as possible,” said OFT senior director Sonya Branch.