Allegations that motorists are paying excessive premiums following accident insurance claims is gaining momentum, following investigations by an online insurer.
Analysis from Swiftcover.com and disclosed to TheDaily Telegraph showed that a small number of credit hire firms – companies which buy owners' details from insurance brokers, bodyshops and damage assessors among others, and then offer not-at-fault motorists hire cars and repairs following an accident – are responsible for inflated costs of up to £200 million a year.
The insurer says that an estimated third of credit hire agencies consistently overcharge for work with submitted bills that are 'extravagantly inflated', often by as much as 100% above the market rate.
The daily newspaper said that the findings were backed up by its readers regularly getting in touch after suffering additional costs after an accident, mainly via replacement cars charged at daily rental rates.
According to Swiftcover, some credit hire firms overcharge for services such as repair work, vehicle storage and replacement vehicles.
The findings come weeks after the Office of Fair Trading (OFT) provisionally referred the car insurance market to the Competition Commission. It estimated that artificially high car hire and repair charges added significantly to drivers' premiums, and said that some insurers were conniving with garages and suppliers of courtesy cars to let them charge inflated prices.
But, Martin Andrews, director general of the Credit Hire Organisation, said that insurers frequently failed to inform motorists they were entitled to services such as a replacement car after a collision, and that were it not for credit hire agencies, many motorists would be in the dark. He acknowledged that credit hire firms' bills for car provision or repairs were often higher than those of the insurance industry, but said that this was because they did not have access to the same deals with suppliers that led to significant economies of scale for insurers.