The market for car insurance has been referred to the Competition Commission for investigation on the basis that it is not working well for motorists.
The Office of Fair Trading (OFT) made the referral because it was worried the structure of the market was making costs and premiums unnecessarily high.
It found that insurers of "at-fault" drivers had no control over the amount spent on repairs or replacement vehicles by "not-at-fault" drivers.
www.bbc.co.uk/news/business-19755037
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"It was also found that certain insurers have agreements in place with repair companies that charge higher labour rates when working on the car belonging to the driver who was not at fault."
Which is effectively price gouging. And artificially raising premiums. Therefore theft. Like Libor...
tinyurl.com/bt5wazs (Daily Telegraph)
Last edited by: madf on Fri 28 Sep 12 at 11:53
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>> "It was also found that certain insurers have agreements in place with repair companies that
>> charge higher labour rates when working on the car belonging to the driver who was
>> not at fault."
They've only just realised that?? :)
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>>
>> They've only just realised that?? :)
>>
The FSA were incompetent but the OFT hold the distinction of being a LOT worse...
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>>have agreements in place with repair companies that charge higher labour rates when working on the car belonging to the driver who was not at fault
I bet that's not true as implied.
Do they mean, that the agreements bring discounts when the insurers own party is being repaired?
Or does it mean that insurers have agreements in place with repairers who have been known to change their rates?
And roughly what impact does a 10% higher repair bill have on final premiums compared to the impact of legal fees, PI claims, unneccesary regulation, fraud, etc. etc.
>>artificially inflated
As opposed to being genuinely inflated?
I couldn't agree more that the whole system needs checking and changing. But it wasn't insurers who started inflating costs and claiming as much as possible and suing the other party for as much as possible. It wasn't insurers that started the whole no-win, no-fee business.
The insurers have obviosuly joined in, but restricting them alone is not going to do anything except increase premiums more.
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MArk,
I know you've a pretty good knowledge of insurance but have you come across a case from last year called Fallowes v Harker transport.
The judgement www.bailii.org/ew/cases/Misc/2011/16.html looks at the egregious practices of one insurer in some detail. Only a County Court case so it's not a binding authority.
Don't think its been appealed though but others on similar facts may have been.
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B'naut,
On the road and on the phone. Will read later and come back.
M.
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Ok, had a quick look through. if it had been binding then I would expect it to have been differently handled.
.*******
According to the transcript;
"RSA has through its subsidiary RSAARL arranged for the repairs to the claimant's car at a direct cost of £1542.78. It now wishes to claim from the defendant's insurer not just the DWS invoice of that figure but also the costs which have been added on by RSAARL";
But I would say it should come down to this;
If I add up the total cost to RSA of RAARL and the repairs, and divide it by the number of claims paid, is that less per claim then it was when RSA was dealing with them directly? Does more efficient admin, driven-down repair costs, centralised purchasing and central control outweigh the cost of sub-contracting to RSAARL on a per claim basis.
Bearing in mind that ALL costs will ultimately feature in someone's insurance premium.
I see no evidence of conspiracy, repair price fixing or manipulation, or criminal behaviour.
I also thing the Judge was wrong and driven by being annoyed. I also wonder how he came to be analysing the claim in this direction.
However, given he mentioned a bunch of irrelevant stuff, got sidetracked by how far the claimiant lived from the repairer, and he did seem somewhat preoccupied by having a dig at RSA.
Some other thoughts;
I love the point about "Policy holders....have to pay the cost of repairs through their premiums and insurance companies have to run an efficient business...... Both share a common interest in devising and implementing systems which drive down any necessary costs to a minimum
Really? So who is it making all these fraudulent and inflated claims then? And how does this compare with his comment about RSA's actions only serving to inflate claims?
There there's loads of commentary about VAT fraud, which the Judge decides didn't exist, and then about whether or not the guy should have had his car collected/delivered when he only lived 20 minutes for the garage. The Judge feels it would have represented "minimal inconvenience" to him, so he should have driven it there and collected it himself.
Aside from his complaints about the availability of documentation (which would seem daft behaviour by RSA legal team) then he seems to be struggling with the fact that RSA were after more than the actual repair bill because of costs seemingly incurred/invoiced by RSAARL.
Will RSAARL be paid even if RSA are unable to recover the money? (actually yes they will). So insofar as RSA is concerned, then this does represent the cost of dealing with the claim.
Given that RSAARL are used to manage claims to lower the total overall cost of dealing with claims, given that the judge feels that such claims would be reflected in increased premiums, then I would have thought that he would have approved.
I struggle with these two comments..
"there is not a single reported case in which what is in truth the cost incurred by the insurers of administering the claim has been allowed as part of the claimant's damages."
"It is true that there are number of reported cases which appear in McGregor in which administration costs have been allowed."
But he maintains the difference is the sub-contracting, which I don't really grasp.
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.****** actually said....
In summary, RSA clearly [annoyed] the Judge with their behaviour - pretty dumb; The Judge had preconceived ideas and opinions; and there is a lot of fog involved.
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But, aside from anything else, the way that the claims process currently works is flawed and needs investigating, changing and stopping.
But believing that only the insurers are flawed, and only regulating the insurers is viable, is quite ridiculous and will simply make it more complex and more expensive.
Set up some limits like;
%age of total claim which can be administration
%age of total claim which can be fees
%age of total claim which can be other costs including alternative transport
Limit number of days for loss of earnings, additional expenses and the like which can be claimed depending on index of repair times.
Exclude PI and court costs in "total claim".
Limit hourly rate and number of hours claimed by claims assistance companies
Regulate costs of alternative transport.
Then somehow stop the media and all the aggrieved accident "victims" who start getting their claims reduced, rioting over the injustice of it all.
Work out how "the poor" can claim against big insurers without "No win, no fee" offers.
Work out how you will drive costs down by using competition when there isn't any because you've regulated everything.
Realising that regulating the underwriting profit margin of a motor insurer would push premiums UP by a significant amount.
Regulating a suppliers profit to, say, 6.5% is actually GUARANTEEING their profit at 6.5% providing its auditable and approved.
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Car insurance to be investigated - madf
