But warns remedies may not go far enough to combat problems in the motor market
The Lloyd’s Market Association (LMA) has welcomed the findings of the Competition Commission (CC) probe into the private motor market in its response to the consultation launched in December.
However, the association said that the remedies proposed by the CC would not solve all the problems the market is facing.
LMA underwriting manager David Powell said that the proposal to move to a first party model for insurance cover would still leave the problem of inflated repair bills for non-fault insurers.
“This could be complex to introduce, but would remove a layer of middlemen as customers would get hire cars from their own insurers,” he said. “It would not, however, tackle the problems with inflated repair bills as non-fault insurers could still manage repairs, and inflate the cost for other insurers.”
And Powell said that the alternative remedy proposed by the CC to combat credit hire and credit repair would introduce new problems for customers.
“The main alternative remedy is for claims to be referred directly to the at-fault insurer. This would be easier to introduce, and would solve the primary problem of non-fault insurers and other intermediaries manipulating costs,” he said. “The main disadvantage is that this remedy risks leaving the customer in a worse position if they require immediate assistance - they could end up waiting for help whilst the at-fault insurer is identified.”
Powell said that the real question for the industry was how the insurance market viewed non-fault claims and their relevance to profitability.
“A fundamental question for motor insurers (and regulators) to consider is whether or not non-fault claims should be used to generate profits, or inflict inflated costs on competitors,” he said.
Although the consultation on the proposed remedies has now closed, interested parties still have until 28 February to issue responses regarding the underlying theories of harm found by the CC.
The commission is expected to issue a response to the consultation feedback in June, with final recommendations due in September.