OFT refers motor insurance market to Competition Commission

Retail Motor Law (RML) has welcomed the provisional decision by the Office of Fair Trading (OFT) to refer the private motor insurance market to the Competition Commission.

In December 2011, the OFT announced it was launching a market study into private motor insurance in the UK in order to establish ‘the facts and reasons behind recent reported increases in private motor insurance premiums’.

It has concluded that insurers “compete in a dysfunctional way that may push up premiums for drivers by £225 million a year”.

Andrew Moody, managing director of RML, said: “I applaud the OFT for choosing to refer this matter to the Competition Commission. It is the right decision given the shocking evidence and the move comes as no surprise to me.

“I recently spent two years compiling a report on what I saw as questionable practices within the UK vehicle refinishing industry, specifically the agreements that certain paint manufacturers and distributors enter into with insurance and accident management companies.

“It is hard to escape the conclusion that some major operators are throwing their weight around and inflating prices to the detriment of smaller companies and, ultimately, increasing costs to the motoring public via higher premiums.

“I submitted the report to the OFT and believe it played a key part in them passing this to the Competition Commission.

“A specialist competition barrister who has seen it said it raised serious competition concerns. He added that an agreement between a manufacturer and a distributor/retailer to fix the resale price is considered a hardcore violation of competition law.”