The Office of Fair Trading (OFT) has announced it is launching a major investigation into the rising cost of car insurance.
The OFT said it is looking at whether more effective competition can be introduced into the industry to bring down prices. It is also looking into whether certain consumers are being treated unfairly.
The investigation has been prompted by figures showing that premiums have risen by as much as 40 per cent since the end of March this year.
The Association of British Insurers, meanwhile, said that members are working hard to try to bring down the cost of motor insurance for drivers. Its director general, Otto Thoresen, said, “Insurers are acutely aware of the impact that higher motor insurance premiums have for their customers.”
Mr Thoresen explained that the industry is taking a series of measures, like its campaign try to reduce “frivolous” claims and bring down “excessive” legal costs for those claiming compensation. Several insurers have been gaining through the practice of referring claimants to personal injury lawyers, thus driving up legal costs for the claimants.
The UK’s largest listed car insurer, Admiral Group, said its shares have fallen partly as a result of the announcement of the OFT investigation.
