The Competition Commission (CC) has published an annotated issues statement in its investigation into private motor insurance. This follows the reference of the market by the Office of Fair Trading (OFT) to the CC in October 2012 (please see our previous blog here). The issues statement explains the CC’s current thinking in relation to its five ‘theories of harm’ – i.e. factors it considers may be adversely affecting competition.
The primary focus of the investigation is on the lack of control that insurers of at-fault drivers have over the way in which repairs and vehicle replacement services are carried out, which in the CC’s opinion may lead to higher costs for at-fault insurers. However, based on data from two surveys, the CC has found that this lack of control does not lead to lower quality repairs (a possibility that the OFT had highlighted when referring the market to the CC).
The CC is also looking closely at the relationship between insurers and price comparison websites (PCWs). It considers that there is a possibility (although no evidence to date) that ownership by insurers of PCWs could lead to undercutting of prices of other insurers or direct manipulation of quotes. In addition, the fact that 91% of policies sold through PWCs are covered by a ‘most favoured nation’ clause (MFN), which prevents the insurer from offering a lower price on its own website or through another channel, could lead to increased premiums. The CC is continuing to consider the possible pro- and anti-competitive effects of MFNs.
The CC intends to consider further the potential higher costs for at-fault insurers and MFNs, as well as a number of other issues. Interested parties are invited to comment by 16 August 2013, and the CC will soon be holding hearings with the parties that have been the subject of its investigation so far. However, since the deadline for publishing its final decision is 27 September 2014, there is still a long way to go in this investigation before the CC’s final findings are known.
The CC’s annotated issues statement can be accessed here.