The motor insurance market faces a probe by the Competition Commission after evidence emerged that insurers compete in a "dysfunctional" way that may push up premiums by £225 million a year.
The report by the Office of Fair Trading (OFT) found premiums paid by drivers are being ramped up because of referral fees and the fact that insurers of at-fault drivers have little control over the way in which repairs are carried out.
This dysfunctional system inflated the cost of providing replacement vehicles by an average of £560 a time, while the cost of repairs was £155 more.
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