The Office of Fair Trading is reacting to about 40 per cent increases in the cost of premiums for the compulsory insurance for all motorists, and has asked insurance companies and others for more information on how the market is working.
The investigation’s scope ranges from the role of price comparison websites such as confused.com, courtesy car hire, authorised repair companies and ancillary products sold by insurers.
It is particularly concerned at huge premium increases in Northern Ireland, which are outstripping even the rises in the rest of the UK.
But the OFT does not explicitly mention personal injury claims, an area that insurers say is primarily responsible for the surge in premium levels.
Insurers have been outspoken in their criticism of a surge in personal injury claims that is causing the industry to pay out £2.7m in legal fees every day.
Politicians such as Jack Straw have also hit back at the claims management companies they blame for a rise in ‘no-win-no-fee’ legal cases, where legal fees far outstrip any damages paid to individuals.
The Association of British Insurers has launched a campaign calling for reform of the legal system to cut the legal fees firms can charge to pursue claims against insurers or retailers.
ABI director-general Otto Thoresen said the motor insurance industry had not been profitable for the last 16 years.
“Insurers are acutely aware of the impact that higher motor insurance premiums have for their customers. This is why the industry is doing everything possible to reduce costs, for example by campaigning for compensation reform to tackle excessive legal costs and frivolous claims, and setting up the Insurance Fraud Register to further reduce fraud,” he said.