The Competition Commission has told the post-accident repair industry that its standards have to improve in its preliminary report on the motor insurance market.
The report, which also says that premiums for motorists remain far too high, said that the complex chain for the settlement of non-fault claims was still increasing the cost of both replacement cars and repairs, which is passed onto the insurers of at-fault motorists.
Problems with the sale of add-on products and with the contracts between price comparison websites and insurers were also identified by the Commission.
Alasdair Smith, the Commission’s deputy chairman and chair of the private motor insurance investigation group, said the UK’s 25 million privately registered cars were footing the bill for unnecessary costs incurred during the claims process.
“In most cases, the party managing the accident claim, typically a non-fault insurer or intermediary, is not the party liable to pay the costs of the claim. There is insufficient incentive for insurers to keep costs down even though they are themselves on the receiving end of the problem,” he said.
“We have concerns about the quality of post-accident repairs because too many repairs are substandard,” he added.
The Commission has also drawn up a list of possible remedies, including: making a driver’s own insurer responsible for providing a replacement vehicle or allowing at-fault insurers to take control over managing claims; more transparency on pricing displayed on comparison websites and improving claimants’ understanding of their legal entitlements in the event of an accident.
In relation to repairs, the report has outlined the possibility of capping the cost of replacement vehicles and repairs and introducing compulsory audits of repair quality.
Insurers were quick to give their support to parts of the report, with Simon Douglas, director of AA Insurance saying that the insurance industry would co-operate fully with the Competition Commission to help contain costs.
“As the Competition Commission points out, there are several organisations involved in the claims process. If the result of the investigation is greater transparency and streamlining the way that claims are managed, particularly by the at-fault insurer, it will benefit both consumers and the insurance industry by reducing costs,” he said.
Nigel Teasdale, a spokesperson for the Forum Of Insurance Lawyers (FOIL) said that the findings did not contain any real surprises over replacement vehicle issues.
“Compulsory provision of replacement vehicles on a first party basis or making it compulsory to go to the at fault insurer would require a change to the law, but may be the most definitive way of ending the practice of excessive credit hire costs, which have been an issue ever since credit hire reared its head in the early nineties,” he said.