Excess charges

We report today on how drivers are being overcharged for motor insurance cover because insurers are using secret deals grossly to inflate repair bills while receiving kickbacks for the difference. Insurers handling claims for drivers involved in incidents that were not their fault are routinely demanding excessive repair charges from rival firms representing “at-fault” drivers. For “prestige vehicles”, not-at-fault customers were charged 100 per cent more than the standard rate for labour.

The insurance industry is regulated and supposedly highly competitive, yet this activity seems dubious in the extreme. The insurers say the practice is legal and since they are all doing the same thing the risks are spread. Some would prefer to back out of the system, but say that they can’t on their own. Motorists go along with this sorry state of affairs because everything is covered by insurance apart from excess charges that attach to most policies.

However, the accumulated costs have to be paid for by someone and in the end that will be the policy holders. Across the industry, the process is creating a hidden cost layer that could be as much as £750 million, equivalent to around 5 per cent of the premiums paid by the UK’S 34 million drivers. These are now at a record high, with the average price paid for comprehensive car cover now £462 a year.

The insurance industry was referred to the Office of Fair Trading (OFT) in 2012, when the watchdog found that motorists were getting a raw deal. However, the regulator, the Competition and Markets Commission, took no action on repair charges. It is time they had another look.