On the Inside
Government report 'confirms worst fear'' about UK
Retail Motor Law (RML) agrees with many of the findings in the long-awaited Competition and Markets Authority (CMA) report on the UK?s private motor insurance market, but questions the insurance industry's ability to fix itself.
The CMA, previously the Competition Commission, is the government department responsible for ensuring markets work well for consumers and businesses. Its investigation into the motor insurance market was initiated in 2012 after the Office of Fair Trading (OFT) found: ''evidence that insurers compete in a dysfunctional way that may push up premiums for drivers by £225m a year''.
Andrew Moody, managing director of RML (who spent 15 years working as a car mechanic and panel beater before retraining as a barrister and solicitor), commented: ''This report confirms my worst fears. The CMA has identified corporate practices which push up insurance premiums and put pressure on vehicle repairers to do things on the cheap. Given what's at stake in terms of road safety, is it right to trust the insurance companies to fix these problems?''
The following extracts from the CMA's Private Motor Insurance Market Investigation Final Report (published on 29 September 2014) are, according to Moody, the most pertinent:
5.20 Overall, we concluded that the measures taken by insurers and CMCs [claims management companies] to ensure repair quality (eg PAS 125 accreditation, audits, monitoring and the provision of warranties) were unlikely always to be sufficient to ensure that cars were repaired to their pre-accident condition.
5.21 Some repairers told us that excessive pressure on costs could be leading to 'cutting corners' on repairs, and some provided us with examples of where this might be the case.
10.167 Overall, while we cannot commit the CMA to a future review, we noted that, if the problems we observed were to increase over time and the size of the consumer detriment were to increase, there would be a strong case for the CMA to revisit this industry, and possibly to reconsider some of the remedies which we have decided not to pursue, in the future.
Andrew Moody continued: ''The dramatic increase in the cost of car insurance is outrageous, but the most important aspect is safety. The CMA has highlighted serious issues around the quality of repairs. These could be matters of life and death so, when the CMA talks of waiting to see if consumer detriment increases, what exactly does that mean?''
With regard to Retail Motor Law and the Vehicle Builders & Repairers Association?s formal complaint to the Office of Fair Trading accusing RBS Insurance, Akzo Nobel and the paint distributor ACIS of price fixing, Moody highlighted the following section of the CMA report:
6.43 In regard to paint, we found complex contractual arrangements involving paint manufacturers, paint distributors, repairers and insurers, involving list prices well in excess of the price actually paid by repairers; we found insurers usually earning rebates; and we found that since 2006 paint list prices had increased about three times as fast as prices generally.
Moody concluded: ''The crash repair sector is the point at which two huge industries, the insurance industry and the automotive industry, intersect. This report clearly supports the view that too much power currently lies with the insurers, to the detriment of both vehicle repairers and the motoring public.''