Friday, September 23, 2011
Tuesday, September 13, 2011
By Tanya Powley
The car insurance industry has had a busy week.
On Thursday, the Office of Fair Trading, the consumer watchdog, announced it would launch an investigation into soaring car insurance premiums.
Any motorist who has had to renew their car insurance recently will be fully aware of how big these rises have been. We’re not just talking about price increases of 10 or 20 per cent. Family members and friends alike have complained to me that their premiums have often doubled in price.
In fact, according to the AA’Insurance Premium Index, average insurance premiums have rocketed by as much as 40 per cent in a single year. To make matters worse, this follows a 30 per cent rise in premiums in 2010.
The consumer watchdog is set to examine whether there are any competition or consumer issues that need to be addressed. It will start collecting evidence of over-pricing and is expected to publish its findings in December.
So the OFT’s probe into insurance costs is likely to be welcomed by motorists up and down the country.
But that’s not the only good news for motorists this week.
On Friday, the government announced it would ban the referral fees paid by lawyers and claim management companies to insurers in personal injury claims.
The payment of referral fees has been repeatedly blamed by insurers as one of the main factors pushing car insurance premiums upwards.
Often termed the insurance industry’s “dirty little secret”, insurers will sell on the details of their customer’s car accident to a personal injury lawyer who will in turn pay the insurer a referral fee for doing so.
This then leads to an increasing number of personal injury claims being made as lawyers and claim management companies phone and send texts to the motorist encouraging them to sue for compensation.
Insurers are blaming this increase in claims for the rise in insurance premiums as they look to pass the legal costs onto the motorist, while pocketing the referral fees that led to that claim being made in the first place.
It is this system that the government wants to remove. Justice official Jonathan Djanogly said: “The ‘no-win, no-fee’ system is pushing us into a compensation culture in which middle men make a tidy profit which the rest of us end up paying for through higher insurance premiums and higher prices.”
“Honest motorists are seeing their premiums hiked up as insurance companies cover the increasing costs of more and more compensation claims. Many of the claims are spurious and only happen because the current system allows too many people to profit from minor accidents and incidents.”
Posted by Steve Douglass at 2:56 PM