Reports of rising motor insurance premiums are to be investigated by the Office of Fair Trading (OFT).
Premiums in the UK are reported to have risen by 40% in the 12 months to 31 March 2011, with those in Northern Ireland increasing at a much quicker pace. The OFT wants to find out if this is true and if it is, what has caused it.
The watchdog will look into consumer and competition issues, which may be to blame for the sharp increase. Specifically it will look at the role of price comparison websites; the provision of hire replacement vehicles; insurance companies using an approved list of repairers; and ancillary products sold by insurance companies.
The AA reported the 40% rise in April and put the average annual comprehensive car policy at £892, rising to £1,533 for high-risk drivers.
Insurers and other industry members will give evidence to the OFT over the next five weeks and the findings will be published in December.
The Association of British Insurers (ABI) says the investigation is a good opportunity to highlight increasing cost pressures insurers face.
Otto Thoresen, the ABI's director general, says: "This will give the industry another opportunity to highlight the cost pressures motor insurers are facing, what action is needed to reduce them, and steps the industry is taking to ensure customers get the best deal when buying motor insurance.
"Rising claims costs from personal injury claims and excessive legal costs, insurance fraud and uninsured driving, coupled with lower investment returns in recent years, have unfortunately led to rising motor insurance bills for many customers. In fact, the motor insurance industry has not been profitable for the last 16 years."