Car insurance premiums have risen by 40% in a year, now the Office of Fair Trading (OFT) is investigating insurance providers.
The average annual car insurance cover rose by 40.1% for the last 12 months to March 31st.
Car insurance premiums in Northern Ireland are significantly higher than the rest of the UK and the OFT is keen to ìestablish the full factsî. The consumer watchdog issued a ìcall for evidenceî so that the pressing issue of the increasing cost of car insurance can be addressed.
Simon Douglas, director of AA Insurance said, ìIn practice what we have seen is intense competition between insurers, fuelled in part by the advent of price comparison sites. Competition has kept premiums low during a period of rapidly rising claim costs caused, as has been widely reported, by growth in personal injury claims and fraud.î
The investigation comes as car insurance premiums continue to rocket. The AA insurance premium index found that the average price for insurance cover went up by a staggering 40.1% in a year. The rapid increase at such a high level has prompted the OFT to act now.
Working in association with the Ministry of Justice and the Financial Services Authority (FSA) the OFT will gather evidence and present its findings in December.
Young drivers have been hit the hardest by the increased premiums has those aged between 17 and 22 years old are now paying an average of £2,431, up 64% in a year.
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A number of factors have contributed to the rising cost of motoring. The increasing number of personal injury claims and fraudulent claims over the last year has driven up the cost of cover as insurance companies have to pay out. An excess of 570,000 claims were made in the past year alone.
The ìcompensation cultureî has gone so far that the government has recently announced a ban on referral fees in personal injury claims.
Justice minister Jonathan Djanogly said, ìMany of the claims are spurious and only happen because the current system allows too many people to profit from minor accidents and incidents. Referral fees are one symptom of the compensation culture problem and too much money sloshing through the system.
The cost of personal injury claims has doubled from £7bn to £14bn in the last decade causing car insurance to increase to cover the costs.