The UK's private motor insurance industry is "not working well for motorists", a report by the Competition Comission has found.
The private motor insurance market in the UK is worth some £11 billion in the UK, but has faced criticism both from motorists and the wider motor industry for what has been seen as dysfunctional business practices.
In 2012, the Office of Fair Trading called on the UK insurance market to make its business more transparent, and asked the Competition Commission to conduct its review.
In particular, the Commission says the process of settling non-fault claims is "complex" and "increases the costs of replacement cars and repairs", resulting in higher premiums for drivers. The report estimates that those costs could raise cumulative premiums by as much as £200 million per year.
The report also noted that too many accident repairs are not completed to the required standard.
Customers also have too little information to hand when being sold add-on products (such as hire cars) by insurance companies, the report found, meaning insurers have a point-of-sale advantage. The Commission says that makes it hard for consumers to identify the best insurance deals.
Price comparison websites also need to review their practices, says the report, as the contract clauses between insurers and those websites often states that the prices offered must be the same across all comparison sites. That reduces competition, says the Commission, and can lead to higher premiums.
The report has also highlighted solutions to those problems, namely offering insurers more freedom over the management of a claim. In addition, the Commission has suggested that repairs should be audited for quality, and that better and clearer information be available to advise motorists on the best deals and offers.
The Commission's deputy chairman Alasdair Smith said: "Our provisional view is that many drivers of the UK’s 25 million privately registered cars are footing the bill for unnecessary costs incurred during the claims process following an accident. These costs are initially borne by the insurers of at-fault drivers, but they feed through into increased car insurance premiums for all drivers."