Car insurance premiums are too high and should be reduced through “far-reaching” reforms, a report by the Competition Commission (CC) has said.
The CC’s report said that the “complex chain” that sees insurers of at-fault motorists covering the costs of replacement cars and repairs for claims managed by insurers of ‘non-fault’ drivers has led to an extra £150-£250 million of premium costs per year.
The CC said that this process provides insufficient incentive for insurers to keep costs down. “This separation of control and liability creates a chain of interactions which result in higher costs for replacement cars and for repairs being passed on to at-fault insurers,” it said.
Other concerns raised by the CC include:
- There are too many poor quality repairs following accidents
- It is difficult for customers to find the best-value insurance products on the market, particularly around ‘add-on’ products
- ‘Price consistency’ contracts between insurers and price comparison sites prevent policies being offered more cheaply elsewhere.
The CC has put forward some possible solutions to the problem, which include introducing a cap on the cost of replacement vehicles and making an insurer of the not-at-fault driver responsible for covering the costs.
James Dalton, head of motor at the Association of British Insurers, said:
“As an industry we remain absolutely committed to improving the car insurance market for hard-pressed motorists.
“[These] possible remedies are a further step along the road to getting a market that enables insurers to deliver fully for consumers.”