How do car insurance providers justify rip-off premiums? - Andrew Vine

And there’s more to come. Consumer groups which highlighted the massive rises expect insurers to pile an additional 11 per cent – or an average £59 per policy – on top next year.

This is scandalous, one of the worst examples yet of rip-off Britain, because drivers have no choice about buying car insurance, which is a legal requirement.

Shopping around is of limited use, because the insurers are plainly acting in concert to increase prices, the consequence of which will be yet more despair in hard-pressed households wondering how on earth they are going to make ends meet.

Last month, representatives from the insurance industry questioned by the Treasury Select Committee denied they were profiteering by hiking prices, claiming they face increased costs for parts and labour, which account for the rise in premiums.

Sorry, but I think they’re being less than truthful. Even if parts and labour have increased in line with inflation, those costs surely haven’t gone up by more than 30 per cent, and can’t account for a further 11 per cent to come.

The MPs who questioned insurers were on the right lines. Frankly, if price rises look like profiteering and smell like profiteering, then they probably are profiteering.

The insurance industry has form for this sort of exploitation of customers. It is only in the last few years that it had to be pressured into stopping one of its most cynical money-making tactics, familiar to all of us if we stuck with the same firm year in and year out for our car or home insurance.

All loyalty got you was an annual increase in premiums, while new customers were lured in at much lower prices.

Consumer protests failed to budge the industry, and it was only when the Government made threatening noises that the practice stopped.

So all of us who drive can be forgiven for taking insurers’ claims about increased costs with a very large pinch of salt. An industry with a history of relentlessly squeezing the maximum out of its customers that had to be dragged into abandoning what amounted to a lucrative con trick can’t expect to be believed.

And an overwhelming majority of us who drive know something else too – that our claims on policies are rare. For most of their customers, car insurers simply pocket the money every year, issue a certificate that makes it legal to drive and don’t have to pay out a penny. Our premiums amount to pure profit.

MPs of all parties ought to be taking a long, hard look at this new round of increases in the cost of insuring our cars, especially coming on top of rising mortgage payments and stubbornly high prices for food and energy.

That backdrop of high inflation and household costs is significant. There has to be a suspicion that the cost-of-living crisis is being used as a justification to hike prices higher than they need to go.

When everybody knows that everything is costing more, increases for basic necessities are greeted by the public with weary resignation. We wince, complain and then pay up, because there is no other way.

It is not excessively cynical to suggest that under cover of that, there is a temptation to raise prices by a few extra percentage points and make the balance sheet look infinitely fatter than most customers’ emaciated bank accounts.

Supermarkets vehemently denied doing this when questioned by MPs in recent weeks, yet their protestations have done nothing to quell the suspicion in the minds of many that they are doing very nicely out of a crisis that is a source of intense worry for countless families.

Nor should we forget that the Competition and Markets Authority found that drivers were paying 6p more per litre of fuel last year than they should have been as retailers boosted their profit margins by inflating prices. Whether on car insurance, food or petrol, it is morally repugnant for companies to inflate profits by price-gouging customers. As consumers, we can sense it happening and it’s time ministers stood with us in objecting.