Premiums for motor vehicle insurance are too high for all drivers, according to the Competition Commission.

The public body, which is responsible for regulating business practice under competition law, has blamed the complex chain of claims for forcing up prices across the board.

The statement comes after a year-long study of the £11bn private motor insurance market, after a referral from the Office of Fair Trading.

It concluded that the system was not working in favour of motorists, and raised concerns that drivers had difficulty in identifying the best value products, and also that post-accident repair work often fell below acceptable standards.

The separation of responsibilities between insurance companies, particularly when a replacement car is arranged by the non-fault party’s insurers, but paid for by the other side, was raising costs unnecessarily.

"This separation of control and liability creates a chain of interactions which result in higher costs for replacement cars and for repairs being passed on to at-fault insurers," the Commission said, reported the BBC.

"The Commission estimates the extra premium costs to be between £150m and £200m a year.

"There is insufficient incentive for insurers to keep costs down even though they are themselves on the receiving end of the problem."

The body is now considering ways of implementing changes to reduce costs. A final report on the issue is expected to be published in September next year.

Potential solutions include making the at-fault party’s insurer responsible for handling a claim in its entirety.

"We look forward to continuing to engage with the Competition Commission as it carries forward its work and we hope that this will lead to further improvements in the market and lower premiums for customers," said James Dalton of the Association of British Insurers (ABI).

Other issues affecting motorists, which were highlighted by the Commission’s research included the presence of price-parity contracts between insurers and price comparison websites, meaning that a policy is not offered more cheaply elsewhere.

However, the planned revisions to the system, particularly with regards to replacement vehicles, have come under fire from the Credit Hire Organisation (CHO), which believes that it is an erosion of a motorist’s legal entitlement to a car in a non-fault accident.

"If these reforms go ahead, we're going to be back to the situation we were in 20 years ago when accident victims were forced to take the bus," said Martin Anders, director general of the CHO.

Have you been affected by rising car insurance costs? Has it meant you’ve been limited in the type of vehicle you are able to drive? Have your say below.