Private Insurance Market Referred By OFT To Competition Commission

Author:Ms Susan Hankey, Caroline Hobson and John Markham
Profession:CMS Cameron McKenna LLP
 
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On 28 September 2012 the Office of Fair Trading (OFT) announced its decision to make a market investigation reference (MIR) to the Competition Commission with regard to the supply or acquisition of private motor insurance and related goods and services in the UK.

The investigation history

The reference stems from a market study launched by the OFT in December 2011, following receipt of information in response to a call for evidence issued in September 2011 and prompted by reports that comprehensive car insurance premiums had risen by 40% between 2010 and 2011. At the time the OFT found reasonable grounds for suspecting that there were features of the market, specifically in relation to third-party vehicle repairs and credit hire replacement vehicles, which were restricting and/or distorting competition, thereby increasing costs across the market (see OFT press release) The market study was concluded at the end of May 2012 with the publication by the OFT of the results and a provisional decision to make a MIR to the Competition Commission. At the same time, the OFT opened a further consultation on the proposed MIR, inviting representations by 6 July 2012 (see our previous Law-Now article)

The September Decision

According to the OFT, the consultation did not reveal any new evidence which could lead it to change its view on the market's shortcomings and on the advisability of a reference to the Competition Commission. The two features of the market that the OFT suspects of preventing, restricting or distorting competition remain:

the apparent inability of insurers of at-fault drivers to exercise choice over how repairs and replacement vehicle services are provided and to assess the reasonableness of their cost the carrying out of practices by insurers of not-at-fault drivers, brokers, credit vehicle hire providers, credit repairers and other related services providers which allow them to generate revenues through referral fees or rebates, while simultaneously...

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