On 28 September 2012, the UK’s Office of Fair Trading (“OFT”) formally requested the Competition Commission (“CC”), to conduct a detailed Market Investigation into the UK private motor insurance sector, valued at £9.4 billion in 2010. The OFT has concluded that there are reasonable grounds for suspecting that features of the UK private motor insurance industry (and related goods and services) distort competition and give rise to increased costs to insurers estimated by the OFT at £225 million in 2011. The parties implicated in the investigation include not only the insurance companies themselves, but also companies engaged in providing services to drivers involved in road traffic accidents (credit hire companies, repairers, accident management companies, and other companies providing goods and services used by these providers). Market Investigations in the UK can take up to two years and have a number of possible outcomes, including imposition of behavioural or structural remedies aimed at addressing aspects of the market that the CC considers anti-competitive.

The OFT’s decision is the latest in a long line of EU and UK competition law enforcement activity in the insurance sector, including the OFT’s 2011 investigation into the exchange of pricing information among UK motor insurers and the European Commission’s recently closed investigation into P&I Clubs. Although many of the practices at issue in this case appear to be specific to the motor insurance sector, the CC’s eventual findings may also inform subsequent competition investigations into other lines of insurance.


The OFT’s decision to refer the motor insurance sector to the CC follows twelve and a half months of fact-finding and analytical exercises, which started on 8 September 2011 with a Call for Evidence. The OFT contacted (among others) motor insurers, brokers, comparison websites, credit vehicle hire organisations, vehicle repairers, and trade associations to request information on a variety of pricing, contractual, and other issues. In December 2011, the OFT published a summary of the responses it had received to its initial Call for Evidence and announced that it was launching a market study in order to determine whether there were grounds for suspecting a distortion of competition in the UK. In May 2012, the OFT requested comments on the results of its market study and on its proposed decision to refer the sector to the CC for a Market Investigation. Although some stakeholders queried the OFT’s findings, the majority of insurers agreed that a reference to the CC was merited.

OFT Decision to Refer and CC Market Investigation

As the OFT’s market study progressed, it began to focus on particular aspects of motor insurance provision where it thought consumers were being failed. In its September 2012 decision to refer the sector to the CC, the OFT identified two particular (and related) issues of concern:

  1. the fact that the at-fault driver’s insurer has little or no control over how – or at what cost – repair and replacement vehicle services are provided to not-at-fault drivers; and
  2. the suggestion that insurers of not-at-fault drivers, as well as brokers, credit hire companies, and others, take advantage of the lack of control over costs of the at-fault driver’s insurer, including by charging higher prices for repair and car hire services and generating additional revenues through referral fees and rebates.

Although the OFT’s concerns as set out in the referral decision appear specific, the terms of the OFT’s actual reference to the CC are (as is standard) very broad: the CC is requested to carry out a Market Investigation into “the UK market for the supply or acquisition of private motor insurance and related goods or services”,i.e., in effect, almost the entirety of the UK’s motor insurance sector. If the CC’s preliminary findings (which are typically issued around 12-15 months into a Market Investigation) indicate that concerns exist, the CC will also consult on proposed remedies aimed at addressing the concerns identified. Remedies can include: (i) behavioural remedies, such as requiring firms to cease conduct that is alleged to distort competition (e.g., by terminating or amending contractual arrangements); (ii) recommendations for changes to the regulatory framework; (iii) monitoring measures, such as requiring market participants periodically to provide information on prices or revenues; or even (iv) structural remedies, such as the sale of businesses or assets.

The CC’s Market Investigation (including any consultation, and final decision, on remedies) must be completed within two years from the date of the OFT’s referral. In the next month or two, the CC will publish a detailed administrative timetable setting out the various procedural steps forming part of the Market Investigation. However, even before publication of the administrative timetable, stakeholders are likely to receive – in the coming days – a broad-ranging initial request for information from the CC. Requests for information will likely be sent to insurers, brokers, credit hire companies, repairers, comparison websites, and trade associations. The responses to these requests for information – and the evidence submitted by the OFT to the CC – will naturally have a bearing on the precise nature and breadth of the CC’s lines of enquiry going forward. However, it seems clear already that the CC’s motor insurance Market Investigation will be the latest major item in a long list of EU and UK competition law enforcement activity in the insurance sector.