Of late, UK’s car insurance sector seems to be going through a flurry of changes. After the 40% hikes in premium rates, along with studies claiming that a third of motorists were uninsured in Britain, the Government finally looks set to get its act together.
Recently, the Office of Fair Trading (OFT) fired warning shots by announcing that they would be probing motor insurance companies. If reports on the latest progress are to be believed, the government now plans on curbing insurance premiums by enforcing bans on referral fee on personal injury claims.
The OFT had earlier declared that its steps would depend upon the results of its findings, which would culminate this December. If there is conclusive evidence that the insurance firms have been engaging in non-competitive practices, more serious actions could be taken against them.
Coming back to the referral fee for injury claims, OFT believes that it has a direct consequence on the meteorically increasing car insurance costs. This is usually because most drivers involved in road collisions make claims on a ‘no-win no-fee’ base. The subsequent personal injury claim is then brought to the table of the insurance company, management company and a lawyer, each of whom charge the other for claim referral. The downside is that motorists who are not using such unfair means are also forced to bear the brunt of rising insurance premiums. This compensation culture has led to an accelerated rise in car insurance costs, where cheap car insurance is disconcertingly missing in action.
The Government’s, and more specifically OFT’s, plans of putting an end to the menace of ‘no-win no-fee’ situation of personal injury claims are surely honourable, but it remains to be seen whether or not it will have the desired checks on the rise and rise of car insurance costs.