WIREDGOV

The OFT has recently referred the UK's private motor insurance market to the Competition Commission for further investigation amid concerns that the market is not working well for motorists.

The OFT provisionally decided to refer the market to the Competition Commission in May this year after a market study gave it reasonable grounds for suspecting that there are features of the market that prevent, restrict or distort competition.

The OFT's market study provisionally found that the insurers of drivers responsible for an accident ('at-fault' drivers) appear to have little control over the way repairs and replacement vehicles are provided to the 'not-at-fault' driver. This may enable the insurers of not-at-fault drivers, and others such as insurance brokers, credit hire organisations and repairers, to engage in practices which appear to result in the cost of replacement vehicles and vehicle repairs provided to not-at-fault drivers being higher than they might otherwise be.

Having considered the responses submitted during a public consultation process, the OFT continues to hold the view that a market investigation reference to the Competition Commission is warranted.
Clive Maxwell, OFT Chief Executive, said:

'Competition appears not to be working effectively in the private motor insurance market. The insurers of at-fault drivers appear to have little control over the bills they must pay, and this may be leading to higher costs for them and ultimately higher premiums for motorists.

'Having publicly consulted on our provisional decision, we are still of the view that there is no quick fix to these problems, and that a more in-depth investigation by the Competition Commission is therefore appropriate.'

The Competition Commission has up to two years to report its findings. If it finds that features of a market are harming competition, it has powers to impose remedies to address the situation.

NOTES

1. The decision to make a Market Investigation Reference  is available on the OFT website.
   
2. On 31 May 2012, the OFT announced that it had provisionally decided to refer the market for private motor insurance in the UK to the Competition Commission for further investigation. See the press release and the market study report. 
   
3. The OFT considers that the statutory test for reference in section 131 of the Enterprise Act 2002 is met, namely that there are reasonable grounds for suspecting that there are features of this market that prevent, restrict or distort competition in the UK.
   
4. The OFT will only exercise its discretion to make a reference when particular criteria have been met, as set out in Market Investigation References: Guidance about the making of references under Part 4 of the Enterprise Act (March 2006). 
   
5. The OFT is referring the market for the supply or acquisition of private motor insurance and related goods or services in the UK. 'Related goods or services' are included to ensure that the actions of other market participants are included within the scope of the reference.