OFT to investigate motor insurance companies

UK motorists will no doubt be hoping that a ban on referral fees will lead to a drop in the cost of car insurance premiums.

In recent times, car insurance premiums have been increasing by 40% year on year and this is crippling drivers who are already struggling to cope with the aftermath of the recession.  In fact the situation has got so bad that in certain parts of the UK, up to 33% of drivers do not have any form of motor insurance.

The current no win no fee system has fuelled a personal injury compensation culture in the UK that sees claims management companies selling accident victims details to personal injury solicitors.

Ambulance chasing personal injury lawyers encourage accident victims to file a personal injury claim for even the most trivial injury and the victim has nothing to lose because no win no fee means exactly what it says. Even if they do win compensation, the lawyer recovers his costs from the defendant not the victor.

The upshot of all this is that insurance companies have to charge higher premiums to cover the cost of the increase in number of claims.

The Office of Fair Trading has announced that it is going to investigate the motor insurance industry and if it decides that the industry has been acting non-competitively, further action will be taken.

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