Kate Hughes: Drivers' wallets hit as regulators take two more years

An investigation into the car insurance industry is already long overdue, yet still there's delay

Finally, after years of crippling premiums, the "dysfunctional" car insurance market is to be taken to task by the Competition Commission.

Last week, the Office of Fair Trading (OFT) confirmed it had referred the market to the commission after a tortuous year-long study of the industry, which is worth an estimated £9.4bn, according to Datamonitor.

Essentially, the concern is that after an accident, the insurer of the driver at fault has precious little control over the costs levied against it by the other insurer when it comes to repair and courtesy cars. By directing the not-at-fault drivers to expensive garages and longer than necessary replacement car hire, costs are being inflated by an average of £155 and £560 respectively, the OFT has found.

Those costs are inevitably passed on to all motorists to the tune of around £225m a year, or around £10 per policy a year, but the outrageous bit is that the insurer pockets a handsome referral fee from the garage or hire car service involved, whose charges are inflated to take that referral payment into account.

"Competition appears not to be working effectively in the private motor insurance market," said OFT chief executive Clive Maxwell. No kidding.

That's the good news. The bad news is that after being investigated by the OFT for a year, the commission now has two years to come to its own conclusions and decide upon any action. Two years may not be a ridiculous amount of time in which to gather massive amounts of additional evidence, conduct consultations and decide what to do about all this, but it's a very long time for our wallets.

The thing that rings alarm bells with me is whether some insurers will use that time to turbo-boost the practice in anticipation of a cull when the commission announces its ruling.

But this is just one of the blights on the pocket of the British motorist. Elsewhere, whiplash claims continue to be a huge and growing issue for the industry and consumers. The increasing practice of filing a false claim for the difficult-to-disprove injury after instigating a collision on purpose is adding an estimated £90 a year to the price of policies, according to the AA.

And yet this all pales into insignificance compared with the leviathan of a premium hike rapidly coming over the horizon for female drivers. We're now just a few short weeks away from the introduction of EU gender rules which could see women's premiums soar as providers are no longer allowed to take gender into account when calculating charges.

Forget drivers ramming you for the payout and rip-off garages, they're small fry compared with this change which could add anything from £300 up to a massive £2,000 to women's premiums, particularly for younger drivers, research from Gocompare.com suggests. That's a potential 94 per cent increase for the female of the species as premiums for men and women are brought into line.

"From 21 December insurers will be prohibited from using gender in their pricing. But, as our survey shows, there has been no equalisation of rates to date, so the introduction of unisex rates is likely to have a sudden and dramatic impact as insurers seem to be holding off until the last minute," Gocompare.com's head of motor insurance, Scott Kelly, has warned.

So once again the news is worst for the young. Paying for insurance, a car and lessons costs an average of £5,000 for the first year of motoring, Asda Money has found last week, with insurance claiming a cool £2,000 give or take.

Yes, they can shop around, take an advanced test and decide to get around in an old burgundy Micra in a bid to cut costs, but £1,500 of that cost is lessons, the supermarket suggests, which are kind of crucial.

ONS figures suggest that average earnings for 18-21 year-olds in the UK is just £13,972, so for those whose parents can't help, young drivers are looking at a whopping 36 per cent of their gross salary to secure their independence. Parents may lament the fact that they continue to support their grown children, but with costs like this, not to mention unattainable property prices and a disastrous jobs market against them, what real hope do they have of finding their own financial feet any time soon?

Voices
voices
News
President Obama, one of the more enthusiastic users of the fist bump
newsBumping fists rather than shaking hands could reduce the spread of infectious diseases, it is claimed
Life and Style
Upright, everything’s all right (to a point): remaining on one’s feet has its health benefits – though in moderation
HealthIf sitting is bad for your health, what happens when you stay on your feet for a whole month?
News
newsHad asteroid hit earlier or later in history, the creatures might have survived, say scientists
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
Peter Griffin holds forth in The Simpsons Family Guy crossover episode
arts + ents
Sport
Laura Trott with her gold
Commonwealth GamesJust 48 hours earlier cyclist was under the care of a doctor
Arts and Entertainment
Gal Gadot as Wonder Woman
arts + entsFilmmaker posted a picture of Israeli actress Gal Gadot on Twitter
News
Bryan had a bracelet given to him by his late father stolen during the raid
people
Arts and Entertainment
Chris Pratt stars in Guardians of the Galaxy
arts + ents
Arts and Entertainment
Pedro Pascal gives a weird look at the camera in the blooper reel
arts + entsPrince Oberyn nearly sets himself on fire with a flaming torch
News
Danny Nickerson, 6, has received 15,000 cards and presents from well-wishers around the world
newsDanny loves to see his name on paper, so his mother put out a request for cards - it went viral
Sport
France striker Loic Remy
sportThe QPR striker flew to Boston earlier in the week to complete deal
News
Orville and Keith Harris. He covered up his condition by getting people to read out scripts to him
People
Arts and Entertainment
Zoe Saldana stars in this summer's big hope Guardians of the Galaxy
filmHollywood's summer blockbusters are no longer money-spinners
Arts and Entertainment
O'Shaughnessy pictured at the Unicorn Theatre in London
tvFiona O'Shaughnessy explains where she ends and her strange and wonderful character begins
Life and Style
Workers in Seattle are paid 100 times as much as workers in Bangladesh
fashionSeattle company lets customers create their own clothes, then click 'buy' and wait for delivery
Finacial products from our partners
Property search
Sell it with flowers: competition is 'intense' for homes with outside spaces

Gardens add a tenth to the value of your home

A London estate agent yesterday put a price on having a garden. David Pollock of Greene & Co reckons it can increase a property's value by a tenth.

Spectators at the Isle of Wight music festival watch the World Cup on the big screen. Betting promotions were a feature of the tournament
Lenders have been accused of persuading vulnerable people to borrow expensive credit

Payday loan firms accused of bombarding vulnerable people with nuisance phone calls

Payday loan firms have been accused of bombarding financially vulnerable people with nuisance phone calls, after a debt charity reported that a third of its clients were plagued by the messages.

The foundation proposed that the Government sets up a scheme to help people avoid losing their homes

Mortgages: 'Homeowners could trade down to shared ownership to defuse rate rise timebomb'

A plan to defuse a “mortgage debt timebomb” when interest rates rise is published today amid warnings that 2.3m households could struggle with their repayments.

Current accounts are too costly and confusing, says CMA as it announces investigation into Britain's biggest banks

Competition regulator to investigate market where it's hard for customers to make comparisons and the big banks' charges can be set too high
All the signs have been pointing up for buy-to-let, but there are clouds on the horizon

Buy-to-let: is it a boom or a bubble fit to burst?

People borrowing to be landlords could face the same restrictions as homebuyers, with MPs voicing fears that property speculation may be overheating the market

Moment of truth for payday lenders: Watchdog plans to curb cost of short-term loans

The chief of the City watchdog, Martin Wheatley, spoke exclusively to The Independent's Simon Read about its attempts to control the worst excesses of unscrupulous high-cost credit companies

Consumers given power to choose a green deal

How would you like to be able to choose how your electricity is made and even where it come from? It may sound futuristic and fanciful but the independent supplier Co-operative Energy has made it a reality this week.

'Scrap the trap': calls for change grow as banks are told to play fair with loyal savers

City regulator says existing customers suffer worst rates

Motor insurers divided on proposals for whiplash ban

MPs want medical evidence for claims. Will this bring higher premiums?

British Gas repays £1m for mis-sold deals

British Gas was yesterday forced to pay back £1m to its customers after mis-selling them energy deals.

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Training/Learning and Development Coordinator -London

    £28000 - £32000 per annum: Ashdown Group: Training/Learning and Development Co...

    Training Programme Manager (Learning and Development)-London

    £28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

    Application Support Analyst / Junior SQL Server DBA

    £40000 - £45000 per annum: Ashdown Group: An established professional services...

    Senior Risk Manager - Banking - London - £650

    £600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

    Day In a Page

    A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

    A new Russian revolution

    Cracks start to appear in Putin’s Kremlin power bloc
    Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

    Apartheid’s sadistic killer that his country cannot forgive

    The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
    Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

    Standing my ground

    If sitting is bad for your health, what happens when you stay on your feet for a whole month?
    Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

    Greene prays for chance to rebuild after injury agony

    Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
    Israel-Gaza conflict: Secret report helps Israelis to hide facts

    Patrick Cockburn: Secret report helps Israel to hide facts

    The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
    The man who dared to go on holiday

    The man who dared to go on holiday

    New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
    Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

    Best comedians: How the professionals go about their funny business

    For all those wanting to know how stand-ups keep standing, here are some of the best moments
    The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

    The Guest List 2014

    Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
    Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

    Jokes on Hollywood

    With comedy film audiences shrinking, it’s time to move on
    It's the best of British art... but not all is on display

    It's the best of British art... but not all is on display

    Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
    Critic claims 'I was the inspiration for Blanche DuBois'

    Critic claims 'I was the inspiration for Blanche DuBois'

    Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
    Sometimes it's hard to be a literary novelist

    Sometimes it's hard to be a literary novelist

    Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
    Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

    Edinburgh Fringe 2014

    The comedy highlights, from Bridget Christie to Jack Dee
    Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

    Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

    The woman stepping down as chair of the Heritage Lottery Fund is worried