A shake-up of the UK’s £11 billion car insurance industry has been announced by the competition watchdog.
The Competition and Markets Authority (CMA) has published measures it expects will lead to increased competition in the car insurance market and reduce the cost of premiums for drivers.
The measures include:
- A ban on agreements between price comparison websites and insurers which stop insurers from making their products available more cheaply on other online platforms.
- Better information for consumers on the costs and benefits of no-claims bonus protection.
- A recommendation that the Financial Conduct Authority (FCA) looks at how insurers inform consumers about other products sold as add-ons to car insurance policies.
As part of its investigation, the UK Government’s CMA found that some price parity clauses in contracts between price comparison websites and motor insurers prevent insurers from making their products available more cheaply on other online platforms. The CMA said this had the effect of restricting competition and leading to higher car insurance premiums overall.
It also found that limited provision of information in the sale of motor insurance add-on products to consumers makes it difficult for consumers to compare the costs and benefits of products, with the sale of no-claims bonus protection giving rise to particular concerns.
Alasdair Smith, chairman of the private motor insurance investigation group and CMA deputy panel chairman, 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.”
Steve Sanders, finance director at Confused.com, which is owned by Cardiff-based insurers Admiral, welcomed the measures.
He said: “This ruling will allow us to offer better prices for the same cover to even more customers.
“Here at Confused.com, we want to be able to negotiate the best deals we can with car insurance providers and in turn pass those savings on to consumers.”