The Office of Fair Trading (OFT) has referred a scam run by insurance companies to the Competition Commission.

Insurance companies have agreed to pay inflated prices for car repair and courtesy car supply to garages and car hire companies that in turn agree to pay the insurance companies fees running into hundreds of pounds. This arrangement is in place of going to several suppliers to get competitive quotes, which would keep the price of insurance down. Whether the monies generated from the car hire companies and garages are enjoyed by the insurance companies, or individuals working for them is not known.

The OFT estimates that the cost of rectifying every car accident could be £560 higher than it should be and that driver’s car insurance premiums could be £10 a year lower if the scam was banned.