Outlook: The real reason we pay so much for car insurance...

Outlook There's a popular narrative that holds that the only reason we pay inflated car insurance premiums is an epidemic of false whiplash injury claims generated by ambulance-chasing lawyers.

It's a story that insurers are fond of encouraging, and the reason is that it takes the heat off them. Thanks to the Competition Commission they're back where they belong: on the top shelf of the oven. The watchdog concurs with the assessment of the Office of Fair Trading that insurers' own bad practices are also very much part of the reason that premiums are so ruinous.

The Commission's case is that because claims are managed by the victim's insurer there is no incentive to keep costs down – so repairs are expensive, and of poor quality. The bills for courtesy cars provided while the work is being done are also over the top.

The irony in all this is that the very same insurers that handle claims on behalf of the victim in a cavalier manner get hit at the other end when they insure people who cause accidents. Sometimes they end up on both sides of the same accident.

No problem. Simply slap a few quid on to everyone's policies and the issue is dealt with. Now then, chaps, those nice people from the credit hire company that provides our insureds with courtesy cars is taking us all out for a booze-up tonight. Just sign your name on the office notice board if you're coming.

It's these sorts of cosy relationships that make life expensive for the consumer. They are the bane of the financial services industry's customers. The question now is how to break them down and make things work better for the consumer. One of the measures floated by the Commission is to hand the management of motor insurance claims to the insurer of the person who caused the accident rather than the insurer of the victim.

That might appear to be sensible on the face of it because they would have a clear motivation for keeping costs low. In reality it is a dangerous road to go down.

Dealing with insurers is a miserable experience at the best of times, even when they're supposed to be on your side. But leaving the victim of a road accident in the hands of the insurer for the person who caused it potentially adds gross insult to unnecessary injury. The commission needs to turn off at the next junction.