The Competition Commission (CC) has published its provisional findings in its investigation into the private motor insurance market, as well as possible remedies to address the competition concerns identified. This follows its issues statement of July 2013 that set out market characteristics it considered might be adversely affecting competition (please see our previous blog here). The CC investigated potential areas of harm in two relevant markets: motor insurance and price comparison websites (PCWs).
In the motor insurance market, the CC highlighted three areas of concern. Firstly, separating liability for and control of costs in handling non-fault drivers’ claims results in at-fault insurers being charged higher costs than actually incurred and a net increase in consumer premiums. Secondly, ineffective monitoring, pressures on repairers to win insurers’ business and consumers’ inability to assess repair quality mean that repairs are often below the legal standard the claimant is entitled to. Thirdly, inadequate supply of information and information asymmetry between insurers and consumers regarding ‘add-on’ products make it difficult for consumers to compare offerings and inflate the price of add-ons.
In the PCW market, the CC found that the use of ‘wide’ ‘most favoured nation’ (MFN) clauses that prevent insurers offering a policy more cheaply on another PCW, coupled with the number of ‘single homing consumers’ (those that do not shop around between different PCWs), translated to higher insurance premiums for consumers.
The CC’s possible remedies include informational remedies to improve claimants’ understanding of their legal entitlements and add-ons. The CC also suggested compulsory audits of the quality of vehicle repairs and put forward seven possible remedies to address the issue of separation of cost liability and control, including giving at-fault insurers first option to handle non-fault claims. In relation to the PCW market, the CC proposed a prohibition on ‘wide’ MFN clauses to be effected via undertakings from or an order to PCWs.
The CC has invited comments on its suggested remedies by 17 January 2014 and on its provisional findings by 7 February 2014.
The CC’s notices of possible remedies and provisional findings are available here.