NAB-CALLS FOR CAR INSURANCE SHAKE-UP TO PROTECT CONSUMERS

Published 24/09/2014 00:00:00 in Press Releases

While welcoming the long-awaited Competition and Markets Authority’s final report into the Private Motor Insurance market published today, The National Association of Bodyshops (NAB) says there is still much work to be done to prevent consumer detriment born out of decades of entrenched dysfunctional behaviour in the motor insurance sector.  It warns the measures do not go nearly far enough.

“Motor Insurance is an essential utility in any economy.   It enables growth and social mobility,” says Frank Harvey, Head of NAB.  “Alternatively excessive costs, which price people out of the market, contribute massive negative impacts to social polarisation and community cohesion, locking people into poverty and low paid jobs.  When market is more like the Wild West than a social utility, it needs a Sheriff.”

NAB is of the opinion that this prolonged and costly government study has done little to offer consumers the guaranteed protection they deserve.

“The study falls well short of the fundamental reforms required to ensure all insurers and Claims Management Companies behave in a moral and ethical way when settling at fault and non-fault claims for all road accident victims.  The CMA has ducked the opportunity to recommend changes in laws that underpin outdated insurance practices,” says Harvey.

While the CMA report appears to offer some short term ‘wins’ relating to price comparison website protocols and improving consumer awareness in relation to add-on insurance products and claims procedures, NAB is of the opinion that the proposed measures will not prevent future price hikes in motor insurance once the CMA spotlight is dimmed nor can they provide binding governance to ensure insurers, claims management companies and others put consumers first while behaving responsibly in their dealings with each other.

Submissions made by various insurers and NAB throughout the CMA study have highlighted market polarisation and distortion operating in the vehicle insurance industry.  The submissions showed marked divisions between those insurers who look to exploit the market and those who have a highly moral/ethical outlook.

Measures adopted by some insurers to gain an advantage over their competitors and highlighted by NAB include*:

·         Differential experiences being offered between first party and third-party claims

·         Opaque behaviour in the disposal of write-off vehicles

·         Manipulation of referral fees

·         Earning rent from cost of claims

·         Overcosting of repairs

·         Operating Service Level Agreement requirements that create potential for future repair quality issues

·         VAT avoidance

NAB suggests that the behaviour of some insurers represents a barrier to new entrants, restricting competition and thus inflating the price of motor insurance.     

Harvey concludes: “The report is hugely disappointing.  It has done little to allay our concerns that consumers are being short-changed when it comes to motor insurance.  We have claimed throughout that insurers and Claims Management Companies are conflicted and are incapable of operating in a self-regulated structure.  We want to see changes in the law to protect consumers including the appointment of a pan-industry adjudicator** to uphold legal, ethical and moral behaviour in the sector.”

NAB notes, however that the CMA has concluded in its report:  “If the problems we observed were to increase over time and the size of the consumer detriment were to increase, there would be a strong case for the CMA to revisit this industry, and possibly to reconsider some of the remedies which we have decided not to pursue, in the future.”

Further info from:

*Examples of measures adopted by some insurers to gain an advantage over their competitors and identified within the CMA study include:

·         Differential experiences being offered between first party and third-party claims

Attempts to steer at-fault motorists away from their chosen garage and to have cost-mandated repair methods and non-original parts and materials determined by the insurer, not the independent expert carrying out the work.  This is not the case for non-fault claims.

·         Opaque behaviour in the disposal of write-off vehicles

Total losses being disposed of by insurers in an irresponsible way leading to vehicles being badly repaired by back-street garages and DIY operators and then being re-sold to unsuspecting consumers

·         Manipulation of referral fees

Insurers forming relationships with Claims Management Companies and lawyers (and increasingly buying them under the guise of “Alternative Business Solutions”) to benefit from non-fault referral fees levied upon at fault victims

·         Earning rent from cost of claims

Insurers inflating the overall cost of non-fault claims and then recovering from the at-fault insurer

·         Overcosting of repairs

Insurers levying retail prices and handling charges on body repairs carried out by their own or nominated bodyshops and recovering from the at-fault insurer

·         Operating Service Level Agreement requirements that create potential for future repair quality issues

Insurer mandated repair contracts that require bodyshops to use excessive repair techniques rather than using new replacement parts

·         VAT avoidance

Insurers owning their own bodyshops or having delegated authority relationships with individual bodyshops to avoid paying VAT on labour charges for repairs (20% saving on 40% of the total repair cost)

**NAB’s proposals for a pan-industry adjudicator (MICA) can be seen by clicking on this link

 

 

ENDS

NOTES TO EDITORS:

Rupal Rawal, Communications Officer
Tel: 020 7307 3412
Mob: 07528 977 157
Press Office direct line: 020 7307 3422
Press Office fax: 020 7307 3406

Web: www.rmif.co.uk  Email: rupal.rawal@rmif.co.uk

The Retail Motor Industry represents the interests of operators in England, Wales, Northern Ireland and the Isle of Man providing sales and services to motorists and businesses. The RMI has a formal association with the independent Scottish Motor Trade Association which represents the retail motor industry in Scotland.

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