LONDON, Sept 27 (Reuters) - UK regulators launched an
investigation of the motor insurance market on Friday, saying
that competition was not working properly and pushing up costs
for consumers.
The Office of Fair Trading, Britain's main consumer
watchdog, said it had decided to refer the industry to the
Competition Commission for an investigation that could take up
to two years.
"Competition appears not to be working effectively in the
private motor insurance market," the OFT's chief executive Clive
Maxwell said.
"The insurers of at-fault drivers appear to have little
control over the bills they must pay, and this may be leading to
higher costs for them and ultimately higher premiums for
motorists."
The OFT had in May provisionally recommended that the sector
be investigated on the grounds that "dysfunctional" competition
between car insurers was inflating the cost of car insurance.
The watchdog is concerned that insurers whose customers are
involved in accidents that they do not cause provide them with
replacement vehicles and repair services that cost more than the
market rate, pushing up costs for the at-fault drivers'
insurers.
The OFT referral comes as Britain's biggest motor insurer,
Direct Line prepares to price its initial public share offer
which is expected to value the business at around 2.5 billion
pounds ($4.05 billion).
Direct Line's owner, Royal Bank of Scotland, is
selling Direct Line to satisfy conditions set by European
regulators for approving the government aid it received in the
2008 crisis that left it 82 percent state owned.
