A CLAMPDOWN on the £11 billion motor insurance market has been announced by the competition watchdog, which should marginally cut the cost of drivers’ premiums.
Measures announced by the Competition and Markets Authority (CMA) include banning agreements between price comparison websites and insurers which stop insurers from making their products available more cheaply elsewhere online.
Currently, some contracts between websites and insurers block deals being offered at a better price outwith those sites.
This restricts competition and leads to higher premiums generally, the CMA said.
The CMA hopes the new measures will improve competition and benefit drivers. The AA said planned changes could reduce premiums by about £20 a year. But it questioned whether such a long inquiry – the CMA has been studying the market since 2012 – had been necessary given the marginal savings for drivers.
The CMA has also said consumers should get better information about the costs and benefits of taking out protection on their no-claims bonus.
It has also recommended that the Financial Conduct Authority (FCA) looks into how insurers tell customers about other products sold as add-ons to car insurance policies.
The competition watchdog said that limited provision of information over add-on products makes it hard for consumers to compare the costs and benefits, with the sale of no-claims bonus protection “giving rise to particular concerns”.
As part of its investigation, the CMA looked at the possibility of capping the cost of a courtesy car following an accident, after finding there was often little incentive to keep this cost down due to a divide between who organises the courtesy car and who pays for it.
But it said that, “reluctantly”, it could not see a way of addressing the problem fully.
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 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.”
But the Association of British Insurers (ABI) said it was “bad news for consumers” and claimed the watchdog had “ducked” the issue of replacement vehicles.