The Office of Fair Trading (OFT) has encouraged consumers to consider buying extended warranties from insurers rather than electrical appliance suppliers.

The advice came as the OFT announced the conclusion of its investigation into extended warranties on electrical domestic goods.

It referred the sector to the Competition Commission for further investigation, as exclusively revealed by Insurance Times last week.

OFT director general John Vickers said the study found that there were serious questions about how effective competition was in the sector.

He said the sales tactics of some retailers exploited uninformed consumers, while costs of warranties did not reflect the considerable variation in products.

The commission will now have one year to report to the Secretary of State on whether a monopoly situation exists in the sector and whether it is being exploited. The report will also address whether the current system operates against the public interest and what remedies may be used.

In the meantime, the OFT will launch a campaign to promote consumer awareness of extended warranties.