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?