Insurance industry investigation to be lengthy and costly?

It’s not exactly a secret that car insurance claims – especially those for whiplash-related injuries – have been running up costs for consumers in the form of increased premiums, an investigation into the matter may be both a lengthy and costly process, with some estimates emerging that it could take as long as two years and incur £3 million in costs.

The Office of Fair Trading recently made it clear that the insurance sector, in its own words, was operating in a ‘dysfunctional’ manner. The OFT provisionally directed the Competition Commission to investigate the watchdog’s concerns, which were narrowly focused on the actions of some insurers who receive kickbacks from car part and paint suppliers, credit hirers, and vehicle repairers for sending business their way.

While these practices don’t cost insurers nearly as much as personal injury compensation awards arising from whiplash claims do – as the industry paid out an estimated £2 billion in costs alone last year –  the costs do amount to an additional £225 million annually. The end result is consumers see their premiums increasing by at least £10 on average in order to recover these costs.

With such massive costs already being racked up by insurers, a paltry £3 million over two years seems like a drop in the bucket in comparison. However, credit hire firms that are (naturally) in opposition to the investigation say that such a review may be completely worthless in the long run, as there are no guarantees that the investigation, once it runs its course, would provide any alternatives that would work any better than the current system.

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