Insurance industry should ban referral fees

Car Repair

Car insurance premiums have been rising for some time, with the cost of a standard comprehensive policy doubling since 2008. One of the main reasons behind this appears to be the growth in referral fees. But what are these fees and how can you avoid them?

Some insurers have been accused of profiting from arrangements that they have in place with vehicle repairers and car-hire companies. In non-fault accidents, many insurers, brokers and repairers have been referring policy holders to companies who charge higher rates. These costs are picked up by the insurers of the party who was responsible for the accident and, ultimately, passed on to consumers in the form of higher premiums.

The Office of Fair Trading concluded in May that the motor-insurance market was dysfunctional and was not acting in the best interests of policy holders. As a result, it has been referred to the Competition Commission, which will have two years to investigate and then report back its findings and make recommendations to improve competition in this sector.

Sarah Cunningham of Accident Repair Centre Howard Basford welcomed the news. “The reputation of the motor-insurance industry has suffered in recent years. We welcome any findings that will drive out poor practice, raise standards and improve the consumer experience.”

While it seems that there will be no quick fix, it may be prudent to take extra precautions until changes in the industry are implemented. If you’re involved in an accident and it’s not your fault then stop and think about what you’re being told by your insurance company. Do you actually need a hire car? Have you really suffered whiplash? It is worth remembering that insurers are there to make a profit and that the cost of claims is eventually charged to consumers in the form of premiums.

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