Dispatches motor insurance investigation uncovers uncomfortable truth
Over the past four years annual car insurance premiums have risen 90% to an average £840. The insurance companies say fraudulent personal injury claims are to blame.
However, whistleblowers tell Channel 4 Dispatches that some insurers have found ways to make money through a range of deals and practices which may be artificially increasing our premiums and in some cases reducing the standard of car repairs.
- ‘Steering' customers into using only their approved body shop network.
- When it comes to ‘at fault' accidents, some insurers keep costs as low as possible when they fix your car as they are paying the bill and in some cases this is affecting the quality of repairs.
- When it comes to ‘not at fault' accidents, instead of trying to drive repair costs down many insurers and accident management companies, acting on their behalf, will do the opposite - and hike up the price of repairs - as rival insurers are paying the bill.
The body shop industry - who carry out car repairs - are damning of these practices.
Channel 4 Dispatches (airing tonight at 8pm) surveyed body shop owners across the country, asking them which of the following they felt has the higest priority for the motoring insurers when dealing with a claim: their own profits, quality of repair or customer service.
Out of 67 respondents, 88% said the insurer's highest priority was their own profits
Andrew Moody, a former panel beater turned solicitor describes some motor insurance industry practices as ‘anti-competitive'.
The Office of Fair Trading has called the entire motor insurance industry dysfunctional and referred it to the Competition Commission.
According to the terms and conditions of many insurance policies a customer who causes a crash can use a repairer of their own choice. However Andrew Moody claims that some customers are steered in to using the insurer's approved networks by claim handlers.
He says: "The term "steering" means forcing you or pressurizing you into a particular repairer nominated by the insurance company. The reason for that is because the more volume that that insurance company can put into a certain repairer network, they are then able to use that volume to apply pressure and distort the commercial practices."
Channel 4 Dispatches has learned that bodyshop repairers and some of the biggest car manufacturers are damning of insurance companies cost cutting on car repairs which they say may compromise car safety.
Volvo warn customers: "You may not be aware that insurance companies are reducing costs by having non genuine parts fitted or panels repaired rather than replaced, which may compromise the cars safety integrity".
Fiat are also concerned about the practice saying: "Most insurers want to repair your car as cheaply as possible. ...they may not adhere to our Fiat repair standards and could avoid using Fiat genuine parts. This will affect your vehicle's resale value and safety".
Bob Geddes ran two bodyshops FOR 15 years before retiring last October. He told Channel 4 Dispatches that motor insurance cost cutting on some at ‘fault repairs' is compromising safety.
Bob says one motor insurance company was unwilling to pay for a damaged door to be replaced. He says: "We had one particular case with an insurance company, where they wanted us to repair a door like that, where the door [crash] bar was damaged... They wouldn't replace the bar." When asked by the programme why they wouldn't replace the door bar, Bob says: "Cost, purely and simply cost." He replaced it anyway and the insurer finally agreed to meet the £250 cost.
The Association of British Insurers who represent many car insurance companies says insurers: "... certainly do not look to ‘squeeze' repairers but must ensure that they get the balance right between paying fair and reasonable costs and ensuring best value for money for their customers".
They also said that insurers would"... continue to work with repairers to ensure that the most appropriate parts are used ... this includes non-Original Equipment Manufacturer parts ... these are not inferior parts".
"No insurer would sanction any repair that could compromise safety. To do so would be totally unacceptable".
Inflating costs to ‘not at fault' accident repairs
Channel 4 Dispatches has also discovered that when it comes to ‘not at fault' accidents some insurers and accident management companies, acting on their behalf, hike up the price of repairs.
A number of body shop repairers told the programme they were forced to use car parts from certain suppliers - even if they could find the same cheaper, elsewhere.
66% of body shops surveyed by Dispatches said it was common practice for motor insurance and accident management companies to try to inflate the cost of not at fault repairs to their advantage.
Under the condition of anonymity. one approved body shop owner "James" agreed to tell us more.
Harry Wallop (HW): "Is it in the insurance's company interest to lower the cost?"
James: "No, because they're not going to pay the bill. Someone else is paying the bill."
HW: "A rival insurance?"
James: "The rival insurance company will pay the bill, so whilst they've got to be seen to be charging certainly for the body repair reasonable rates, everything else they will just charge as much as possible for."
James revealed that he has to charge different labour rates depending on whether a rival insurer is paying the bill.
HW: "So there are 2 separate labour rates when you come to mending cars?"
HW: "How big a difference is it?"
James: "Some can go down as low as £21 an hour and sometimes we can charge, depending on the product, you could charge £40 an hour."
HW: "For doing exactly the same work?"
James: "Exactly the same job by exactly the same people."
There were other price hikes too including courtesy car hire as well as referral fees he has to pay - which were contributing to overall rise in "not at fault" repairs.
Malcom Tagg, Director General, Vehicle Builders and Repairers Association says: "Body shops feel bullied by insurance companies because they want to do the job right, it's their reputation ultimately which is at stake, but the insurance companies don't want to pay for the job to be done correctly."
"Well the consumer fits in the middle by being not kept aware of what's going on and really, the bit that really would aggrieve me is the fact the consumer has no choice. He's totally unable to control what happens to his car."
The Office of Fair Trading
The Office of Fair Trading has called the entire motor market "dysfunctional" and referred it to the competition commission.
The OFT say because of inflated costs and rebate deals we could be paying £225 million more that we should be in annual premiums. Some believe this is a conservative estimate
The Competition Commission have until 2014 to decide what to do.
Secrets of Your Car Insurance: Channel 4 Dispatches, Monday 7th January at 8pm