The Financial Conduct Authority has said high motor insurance premiums are partly down to the way insurers manage claims.
It said that motor insurance prices have been driven up by the rising cost of claims, which is the result of higher labour rates, higher energy costs, increasingly complex vehicles and the cost of hire vehicles.
The cost of theft claims and uninsured drivers has also risen significantly.
However, the FCA also found that referral fees from credit hire companies and accident management companies have contributed to slower claims processing and therefore higher costs.
It said it is taking direct action against companies where it had identified bad practices, and would provide this evidence to the government as part of it’s motor taskforce, which was set up to understand the reasons behind high motor insurance premiums and take steps to reduce them.
A fair deal
Sarah Pritchard, deputy chief executive of the FCA, said: “Insurance provides peace of mind but people must be confident they can get a fair deal and be treated right when the worst happens.
“External cost pressures are primarily to blame for recent motor premium increases, not increased firm profits, but there is some more work to do on claims handling. That’s why we’re stepping up, making sure claims are handled promptly and fairly and pushing for a coordinated effort to tackle the root causes of rising motor premiums.
“A well-functioning insurance market helps consumers navigate their financial lives and supports growth by building people’s resilience to financial and personal shocks.”
