UK: CMA publishes final report in car insurance market investigation


    On September 24 2014, The Competition and Markets Authority (CMA) published the final report in its investigation into the private motor insurance market. The report covers the measures the CMA anticipates taking to increase competition in the car insurance market and reduce the cost of premiums. The measures include:

    • a ban on agreements between price comparison websites (PCW) and insurers which will stop insurers making their products available more cheaply on other online platforms;
    • better information for consumers on the costs and benefits of no-claims bonus protection; and
    • a recommendation that the Financial Conduct Authority (FCA) examines how insurers inform consumers about products sold as add-ons to policies.

    The measures are in response to several of the CMA’s findings that existing practices harm competition, including:

    • price parity clauses in contracts between PCW and motor insurers, which restrict competition and lead to higher premiums;
    • the limited information provided to consumers regarding add-on products, which makes it difficult to compare the costs and benefits; and
    • concerns over the way in which customers are sold no-claims bonus protection.

    As we have previously reported (please see our previous blogs here and here), the competition authorities were also concerned that the lack of control that insurers of at-fault drivers have over the way in which repairs and vehicle replacements are carried out leads to higher costs for at-fault insurers.

    The CMA concluded that there was no way of addressing this particular problem fully without a fundamental change in the law, and because the extent of the problem is not as high as was first envisaged, it does not warrant such change. However, the CMA encourages those with the ability to make the market work better to reconsider the benchmarks used in awards for non-fault replacement cars, which it says do not reflect the cost of the services provided.

    This concludes a long review of the car insurance market, which began in September 2011, and sees the CMA using its powers to bring about substantial changes to the market. Despite this, some observers such as the AA and the ABI have criticised the CMA for not going far enough to protect consumers.

    A copy of the CMA’s final report and other related documents are available here.

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