The Office Fair Trading (OFT) has decided that an agreement between motor insurers and replacement vehicle providers is beneficial to consumers as long as independent assessors are used to set administration fees and hire rates.
The agreement is aimed at avoiding high levels of dispute and litigation in the claim process.
The agreement was notified to the OFT by the ABI and provides a framework for settling claims made by credit hire organisations (CHOs) to insurers for the cost of replacement vehicles provided by CHOs to policyholders.
The OFT has determined that although the collective approval of replacement vehicle hire rates through the agreement has the effect of fixing prices, the anti-competitive effects of the agreement are counterbalanced by its benefits.
However the OFT said that some amendments to the agreement are necessary for the agreement to qualify for an exemption under competition law:
* an independent assessor should determine appropriate replacement vehicle hire rates rather than the current sub-committee of CHOs and insurers;
* the independent assessor should also determine the fixed administration fee paid by CHOs that settle claims within the terms of the agreement.
