OFT To Probe Spiralling Car Insurance

Industry blames blood-sucking lawyers, fraudsters and the uninsured...

By Chris-R / Thursday, 8 September 2011 / Loading comments

The Office of Fair Trading is going to probe the rising cost of motor insurance, it has announced today.

"UK annual comprehensive car insurance premiums are reported to have risen by as much as 40 per cent in the year ending 31 March 2011," the OFT says, adding it wants to establish the full facts, the reasons behind any increase, and whether there are any consumer or competition issues that need to be addressed to improve the functioning of the market.

The Association of British Insurers has been quick to leap in with a response, and a list of cost pressures it says are impacting on insurance premiums. It makes startling reading, and if true doesn't paint a very rosy picture of the current set-up. Here's their list:

1) Personal injury claims. The ABI says the number of bodily injury claims received by insurers rose by 72% between 2002 and 2010

2) Excessive legal costs. For low value personal injury motor accident claims, for every £1 insurers pay in compensation, a further 87 pence is paid to claimant lawyers. UK consumers pay £2.7million every day to claimant lawyers through their motor insurance premiums - that is 10% of every motor premium.

3) 'Crash for cash' staged accidents and other insurance frauds, including fake whiplash claims. Last year insurers detected 40,000 fraudulent motor insurance claims worth £466 million.

4) Uninsured driving. The cost of compensating the victims of accidents involving uninsured drivers is £500 million a year, paid for by honest motorists through their insurance premiums.