The car insurance market has been referred to the Competition Commission for further scrutiny to determine if its actions are resulting in unfair premium prices.
A study conducted by the Office of Fair Trading (OFT) in May has suggested insurers of 'at-fault' motorists may be forking out more than they have to for repairs made to the 'not-at-fault' driver's vehicle.
It was also indicted that insurers were being forced to pay more in compensation on replacement cars that are given to the 'not-at-fault' motorist for longer than is needed.
Ultimately, this results in higher premiums for all drivers as insurers are paying costs that are above the odds.
Chief Executive of the OFT Clive Maxwell said: "Competition appears not to be working effectively in the private motor insurance market."
The investigation was welcomed by Shadow Transport Minister John Woodcock, who said Britons were facing "eye-watering rises" in their policies at a time when households are under significant financial pressure.