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OFT Investigates the Motor Claims Market

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The Office of Fair Trading is investigating the £2billion a year car insurance claims market, as a response to a 20% surge in premiums in the last two years.

Insurers have defended the statistics by claiming that it’s down to more fraud and personal injury claimants. But the OFT is citing large bills from car-hire firms and garages which indicates the opposite.

If a driver is shown to be at fault or admits liability after a crash then their insurance covers the cost of a courtesy car and the repair bill for the other person. Insurers are being presented with absurdly high claims, according to the OFT.

Car hire firms are a target for the investigation as they are the ones who supply courtesy cars. Alarming figures reveal that claims are usually between £1,200 and £1,500 however this is only between £400 and £600 if the vehicle was supplied by the insurer.

Car hire firms reportedly engage in paying £300 in referral fees to get a hold of drivers’ details.

Currently it’s unknown how much these claims add on to average prices, but an average of £40 is added on to the average premium due to personal injury legal costs.

The report will also be investigating an increase in insurance costs after the drivers’ car is up and running again.

Sonya Branch from the OFT commented that rival firms were possibly attempting to extract cash from each other, instead of trying to keep insurance premiums low.

Furthermore the report will also look into legal cover on insurance policies, as a response to the suspicion that many are pressured into taking it out, even though the numbers who use it are low.

The Association of British Insurers member Nick Starling welcomed the report and reaffirmed his view that insurers wanted the best deal for their customers.