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OFT investigates private motor insurance

14 December 2011

The Office of Fair Trading (OFT) has launched a probe into private motor insurance in the UK.

It will focus on the provision of third party vehicle repairs and credit hire replacement vehicles to claimants.

The decision to launch a market study was prompted by the responses to the OFT's recent call for evidence, which focused on finding out the facts and reasons behind recent reported increases in private motor insurance premiums.

Evidence gathered by the OFT since September 2011 suggests that private motor insurance premiums paid in the UK rose by around 12% between 2009 and 2010, and by a further 9% in the first three quarters of this year.

Claims

Responses indicated that a key factor in these increases has been a rise in the costs associated with personal injury claims. However, the increased cost of third party non-injury claims, which include credit hire replacement vehicles and third party vehicle repairs, has also had a notable impact.

Sonya Branch, OFT Senior Director of Services, Infrastructure and Public Markets, said: “Our call for evidence has enabled us to gather information swiftly and efficiently so that we can now focus on specific features of the market that we are concerned could be restricting or distorting competition.

"Our concerns relate to the provision of third party vehicle repairs and credit hire replacement vehicles to claimants, where we suspect companies may be competing to extract money from each other rather than keeping premiums as low as possible and providing car owners with value for money. By carrying out a market study, we aim to clarify whether a market investigation reference to the Competition Commission is appropriate.”

The OFT expects to complete its market study by spring 2012.

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