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Car insurance could be getting cheaper

By raccars Published

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There's some good news for British motorists with the announcement of a scheme to reduce the cost of car insurance and develop competition between insurers. The project is the brainchild of the Competition and Markets Authority (CMA), which has been studying the private car insurance industry in the UK which is worth £11 billion, after the Office of Fair Trading raised a number of concerns about the price of premiums in September 2012.

Among the measures proposed is a plan to set a limit on the charges faced by insurance companies of drivers at fault in an accident, when they provide a courtesy car for the non fault driver to use while their own is undergoing repair work. At the moment, insurance companies have no choice but to pay for replacement vehicles at a sometimes exorbitant rate and the CMA is hoping to make the system more realistically reflect the costs involved. These charges are inevitably passed on to the consumer in the form of higher insurance premiums, at an estimated cost of about £180 million annually. The regulator hopes that reducing insurers' costs will see premiums reduced across the board. An independent panel will assess the level at which the cap should be set.

Consumers are also to be educated on their rights in the event of an accident and to be given more information about the rules and regulations surrounding the no claims bonus protection system.

The CMA is also calling for an end to price comparison websites' agreements on price parity, so that insurers can offer their products at a lower price elsewhere. Currently, insurers are subject to clauses with online insurance comparison companies, that prevent them from setting lower prices outside that agreement. Such agreements have been called anti competitive and the British Insurance Brokers' Association (BIBA), believes customers are suffering as a result. While price comparison websites can help motorists to find good deals on car insurance, there is also a risk that price parity arrangements probably artificially inflate overall insurance costs.

The CMA is compiling a report on its findings, which is due to be released in September, although any changes to regulations made as a result are not likely to be implemented for several months after that. Insurance companies have apparently welcomed the CMA's intervention and are happy to follow its recommendations.

The CMA's report will not include investigations into fraudulent whiplash claims, which it considers a separate issue.

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