The Office of Fair Trading referred the UK's car insurance industry to the Competition Commission for further investigation amid concerns that the market is not working well for motorists, it announced today.
The decision came after a market study said there was suspicion that some features of the market prevent, restrict or distort competition.
The investigation comes in the midst of Direct Line’s £2.6bn IPO.
The OFT's market study provisionally found that the insurers of 'at-fault' drivers “appear to have little control over the way repairs and replacement vehicles are provided to the 'not-at-fault' driver.”
Clive Maxwell, chief executive of the OFT, said: “Competition appears not to be working effectively in the private motor insurance market. Having publicly consulted on our provisional decision, we are still of the view that there is no quick fix to these problems, and that a more in-depth investigation by the Competition Commission is therefore appropriate.”
Nick Starling, director of general insurance at the Association of British Insurers, welcomed today's announcement.
"The OFT found what insurers have known for years – that when a customer has a crash that is their fault, the insurer has little control over the cost of the subsequent claim," he added.
The Competition Commission’s investigation can take up to two years to report any findings, the OFT said.
City A.M. Reporter