Rise in car-cover costs prompts OFT investigation
The Office of Fair Trading has launched an investigation into car insurance costs, which climbed as much as 40 per cent in 12 months.
The government watchdog has asked insurers to justify the huge increases. In particular, it says it will examine why insurance premiums in Northern Ireland are significantly higher than in the rest of the UK. It is also looking into the role of price-comparison sites.
Its call for evidence yesterday could lead to a full inquiry but insurers were quick to defend the increases. Simon Douglas, director of AA Insurance, said: "The OFT inquiry appears concerned that there has been collusion within the industry over premiums, but in our view that is not the case."
Otto Thoresen, director general of the Association of British Insurers, said higher premium costs were the result of "rising costs from personal-injury claims and excessive legal costs, fraud and uninsured driving, coupled with lower investment returns." Mr Douglas said intense competition fuelled by price-comparison sites had kept premiums low while claim costs climbed. "By 2009 insurers were paying out £123 in claims for every £100 taken in premiums," he said.
The OFT has given insurers and other interested parties a month to give evidence. It said it will present its findings by December.
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