Car-insurance market in the spotlight

Agreements that prevent car insurers from undercutting the deals available on price-comparison websites would be outlawed under new proposals to make the market more competitive.
It is one of a series of measures aimed at cutting the cost of premiums for motorists unveiled by the Competition and Markets Authority (CMA).
It found that “price-parity” contracts between insurers and price-comparison services prevented insurers from making their products available more cheaply elsewhere online, which restricted competition and resulted in higher premiums.
The proposals also include a demand for better information for customers on the costs and benefits of no-claims bonus protection – an area where the CMA said there were “particular concerns”; and a recommendation that the Financial Conduct Authority, the regulator, looks at how insurers inform their customers about other products sold as add-ons to car-insurance policies.
But the CMA said it had been unable to find a solution to the problem of “post-accident services”, which often involver an insurer of a not-at-fault driver overcharging the insurer of the at-fault driver for providing a temporary vehicle. These extra costs lead to higher premiums.
Announcing the CMA’s findings, deputy panel chairman Alasdair Smith said: “There are over 25 million privately registered cars in the UK and we think these changes will benefit motorists who are currently paying higher premiums as a result of the problems we’ve found.
“There need to be improvements to the way price-comparison websites operate. They certainly help motorists look for the best deal, and this in turn has led insurers to compete more intensely, but we want to see an end to clauses which restrict an insurer’s ability to price its products differently on different online channels. We expect this to lead to greater competition between price-comparison websites.”
Mr Smith added: “We have looked very hard at resolving the problem with the cost of post-accident services to drivers who are not at fault in an accident, in particular temporary replacement cars.
“Reluctantly, we have had to conclude that we cannot see an effective way of addressing this problem fully short of a fundamental change in the law and, whilst this problem does increase premiums for motorists, the extent of the problem is not as high as was at first envisaged and does not warrant such a radical measure.”
Rod Jones, of Uswitch.com, said: “These proposals will go a long way towards stamping out the unfair practices occurring in the car-insurance industry that have not been in consumers’ best interests.
“Price-parity clauses are unfair as they restrict choice and can prevent consumers from getting the best deal possible.
“We fully support the CMA’s recommendation for these to be banned, but we are disappointed the CMA couldn’t find a remedy on the cost of post-accident services, as this could have further reduced premiums for motorists.”
The Office of Fair Trading referred the market to the Competition Commission two years ago. The CMA took over the role of the Competition Commission earlier this year.