The Competition Commission is to carry out a full-scale investigation into claims that motor insurers have colluded with repair firms to rip off customers.
After its own initial probe, the Office of Fair Trading announced it was referring the case to the commission, which has the power to impose fines or force companies to change their behaviour.
The investigation will centre on the way motor insurers often control how and where a car is repaired after a crash. Insurance firms allegedly receive referral fees from repair firms for passing business their way. This bumps up the costs paid by the insurer of the at-fault driver and in turn drives up premiums. It's also claimed that some repair firms have deals with insurers to charge higher fees than if a customer was paying directly for the work.
Similar allegations have been laid at the hire car industry, with claims of inflated costs when insurance is paying the bill to provide a courtesy car, and even a suggestion that some insurers book a car for longer than is actually needed to bump up revenues for the firm. In both cases insurers allegedly receive a cut of the extra cash.