Fear of price-fixing after insurers swapped data

BRITAIN's biggest motor insurers have been ordered to stop sharing data which potentially allowed them to fix prices.

The Office of Fair Trading has ruled that the use of a market analysis tool by seven major insurers, including Aviva, Axa and Royal Bank of Scotland, breached competition rules.

The analysis tool, Whatif? Private Motor, which was run by Experian, provided brokers with details on insurance premiums including any price hikes that insurers were yet to introduce.

But it was also possible for insurers to use it to gain information on competitors' pricing policies, including their underwriting practices and which areas of the market they were particularly competitive in. The tool also monitored premium increases being made by firms before the information was in the public domain.

The issue came to light after leading insurer RSA feared that it may breach competition rules and notified the OFT.

The OFT said yesterday that the tool increased the risk of price fixing among insurers and raised competition law concerns, although it added that its use did not constitute a secret cartel. In response to the investigation, the insurers and IT software providers, which also included Ageas Insurance, Liverpool Victoria, RBS Insurance and Zurich Insurance, and IT group SSP, have agreed that they will no longer be able to access each other's individual pricing information through Whatif?. They will still be able to get details on other premiums through the tool, but the information will now be anonymous and will represent the average for at least five insurers.

They will also only find out about price changes once they go live.

The OFT is currently consulting on a draft text for the commitments made by the groups, and once it has been formally accepted it will end its investigation, without making a decision on whether the Competition Act was breached.

The trading watchdog said it had limited its investigation to a small number of insurers in order to complete it quickly.

But it stressed that the outcome had implications for a number of similar tools being used by the industry.

Clive Maxwell, executive director at the OFT, said: "Competition between firms drives better value for consumers and growth for the economy, and anything that potentially dampens that is a cause for concern."

Insurance premiums have soared by 40 per cent during the past year, but the Association of British Insurers (ABI) insisted the rise was due to a combination of increased fraud and personal injury costs, rather than a lack of competition among insurers.

An ABI spokesman said: "As the OFT has made clear, it has not made a finding of an infringement of competition law."Motor insurers have made an underwriting loss for the last 16 years, amounting to 1.6 billion in the last year alone due to issues such as insurance fraud and increasing personal injury claims which urgently need to be tackled."