Insurers hit back at Channel 4 Dispatches allegations

The insurance industry has reacted angrily to accusations made in a Channel 4 Dispatches programme on Monday night that car insurers were maximising profits at the expense of customers.

Direct Line, the ABI and Ageas have all rejected the claims in the programme that insurers of not-at-fault drivers were hiking the cost of car repairs payable by insurers of at-fault drivers following an accident, and “steering” customers to using mechanics approved by the insurer and reducing car repair costs as much as possible for their own at-fault drivers through the use of approved mechanics.

Direct Line was singled out by the Dispatches programme as illustrating what it considered to be sharp practices within the insurance industry.

In a statement issued this morning Direct Line said: “We categorically reject any suggestion that we manipulate costs to the detriment of our customers or the safety of their vehicles. Our claims process also does not include the use of accident management companies.

“We operate a network of independently accredited repair centres, and our customers are also able to use any repairer of their choice. However, we do require a repair estimate for approval, as we rightly expect the repairs to meet our own stringent specifications at a reasonable cost. Our repair methods do not differentiate between ‘at fault’ and ‘non fault’ repairs.

“We provide our customers with a great product, offering value for money, underpinned by excellent service. Clearly, claims costs directly influence the price of insurance, so we aim to alleviate these costs by securing discounts from our suppliers as a bulk purchaser - an entirely legitimate business practice which is standard in any industry and does not disadvantage customers in any way.

“All of our primary repairers are British Kitemark PAS 125 accredited and network repairs are guaranteed for a minimum of five years or we will match the manufacturer’s guarantee period if longer.

“We have previously stated that we welcome the OFT’s [Office of Fair Trading’s] decision to refer the private motor insurance industry to the Competition Commission and the removal of any dysfunction within the market.”

‘Responsibility’

The ABI said the priority of all its members at every stage of the repair process was that the customer – whether their own policyholder or a third party – got the best possible repair as quickly as possible and at a fair price to the insurer.

“Insurers have a responsibility to their customers to do all they can to control their costs, because excessive costs mean higher motor insurance premiums,” the ABI added in a statement.

“Motor insurers and their customers currently face unprecedented cost pressures due to the rising costs of settling personal injury claims, insurance fraud and uninsured driving. This makes the need to manage costs more important than ever. But this should not be at the expense of paying fair and reasonable repair charges.

“Insurers want to ensure good working relationships with the body shop repair business – they 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.”

Ageas Insurance claims and operations director Rob Smale said: “The practices referred to in the Dispatches programme are not practices we would ever use or condone. We want to reassure our brokers and clients that we continue to promote the highest level of standards across our car repairers, using the most cost effective and safe methods as approved by Thatcham, whilst offering customers the choice they want.”

The Dispatches programme alleged motor insurers and accident management companies were guilty of “maximising profits at the expense of doing what’s best for the consumer”.

The programme, which aired on Channel 4 at 8pm, follows the decision by the OFT to refer the car insurance industry to the Competition Commission for practices it has called dysfunctional in September, suggesting motor insurance premiums were inflated by as much as £225m a year.

‘Steering’

In one example of so-called steering, Dispatches journalist Harry Wallop telephoned Direct Line to tell them of a car accident in order to make a claim on his car insurance policy and have repairs carried out.

Wallop was directed by a customer service agent to a Direct Line approved garage, which would, he claimed, have required him to drive several miles in his damaged car along a motorway, despite having driven his car to a local Volkswagen dealership.

Wallop was also told work carried out by the local VW dealership could not be guaranteed by Direct Line and that he may be missing out on certain “perks” by using a garage that is not approved by the insurer including the use of a courtesy car and free valeting of his damaged car. But Dispatches stated the terms and conditions of Direct Line’s insurance policy make it clear that customers can go to the garage of their choice.

The Dispatches programme is the second investigation into the car insurance industry in as many years. In June 2011, a BBC Panorama programme investigated how criminal gangs were helping to push the price of car insurance premiums through so called crash for cash scams.

The programme is likely to have made uncomfortable viewing for all car insurers after the Competition Commission said in December that it would focus its investigation into repair costs and aggregator clout as part of its probe into the UK motor market.

The commission said its review would investigate:

• if some repair firms’ relationships with insurers hike costs for rival insurers;
• if add-on products are sold on the back of private motor insurance; the relationship between insurers and parts/paint providers;
• whether consumers are ripped off by firms offering services after a motor accident;
• whether the largest aggregators have market power and how this affects consumers; and
• how automatic renewals and cancellations affect no claims bonuses.

The commission is expected to publish its provisional report in September.