The Office of Fair Trading (OFT) is to investigate recent sharp increases in motor insurance premiums.

The competition watchdog has issued a call for evidence over the next five weeks to provide a clear picture on the hotly disputed topic.

The insurance industry claims that a growing compensation culture has forced costs to rise, but personal injury lawyers insist premiums would increase no matter what changes are made to civil litigation procedure.

The OFT will publish its findings in December, after consulting government departments, the insurance industry and members of the legal profession.

In particular, the focus will fall on the role of price comparison sites, insurance companies’ use of panels of approved repairers and the provision of credit hire replacement vehicles to drivers who are involved in accidents that are not their fault.

The OFT’s intervention comes at a time when the insurance industry and claimant lawyers are at loggerheads over the government’s plans for civil litigation reform.

The Association of Personal Injury Lawyers welcomed the chance for the OFT to probe the ‘real data behind the spin’.

APIL chief executive Deborah Evans said: ‘This should provide an impartial view as to the reason behind rising premiums.’

Otto Thoresen, director general of the Association of British Insurers, said: ‘This inquiry gives 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.’