Is your insurance company playing fair?
The Regulators are having a good look at the insurance industry. This news has come from the Competition and Markets Authority. They have set out the changes it proposes to make in the private motor insurance (PMI) market to increase competition and reduce the cost of premiums for motorists. Release date 12 June 2014.
The measures include:
- a cap on the charges passed to the insurer of an at-fault driver in an accident for the cost of providing a replacement vehicle to the non-fault driver, to more closely reflect the costs incurred and remove significant inefficiencies
- better information for consumers about their rights following an accident
- a ban on price parity agreements between price comparison websites (PCWs) and insurers which stop insurers from making their products available to consumers elsewhere more cheaply
- better information for consumers on the costs and benefits of no-claims bonus protection
- a recommendation that the Financial Conduct Authority (FCA) looks at how insurers inform consumers about other PMI-related add-on products
The Competition and Markets Authority (CMA) will now consult on these measures before publishing the final decision of its independent group of members in September 2014.
In December 2013, the provisional findings report found that there was a significant difference between the costs incurred by at-fault insurers in providing a replacement vehicle and the costs charged to the at-fault insurer when the replacement vehicle was provided by others. The CC found that this difference had the effect ultimately of increasing the cost of PMI to consumers.
It has been found that some price parity clauses in contracts between price comparison websites and insurers had the effect of suppressing competition on price and were likely to lead to higher PMI prices overall.
In addition, it was found that limited information in the sale of Motor Insurance-related add-on products to consumers made it difficult for them to compare the costs and benefits of products and to identify best value, in particular in relation to no-claims bonus protection.
Alasdair Smith, Chair of the private motor insurance investigation group and CMA Deputy Panel Chair, said:
“There are over 25 million privately registered cars in the UK and we think these changes will benefit motorists who are currently paying higher premiums as a result of the problems we’ve found.
A cap on replacement vehicle costs will reduce the amounts charged to insurers of at-fault drivers, which will cut out some of the inefficiencies in the system and feed through to reduced premiums for all drivers. Through the measures we propose to introduce, we will address the problems that stem from those managing the non-fault accident claim having little or no incentive to keep costs down.
There also need to be improvements to the way price comparison websites operate. We believe they are great in helping motorists look for the best deal, and this in turn has driven insurers to compete more intensely, but we want to see an end to clauses which restrict an insurer’s ability to price its products differently, whether on different price comparison sites or on other channels.
We also find that the way motor insurance-related add-on products are sold makes it hard for customers to obtain the best value. We would like the FCA, as part of its on-going work looking at add-ons across all insurance products, to consider how drivers could be better informed in making their choices. We find that there are particular problems in relation to no-claims bonus protection, where both the price of this product and its benefits are often unclear to consumers, and we believe insurers should provide much better information about it.”
The provisional decision on remedies, two working papers and all other information on the investigation are now available on the private motor insurance case page. The CMA is required to publish its final report by 27 September 2014.
This tells you that impartial expert advice is very necessary. That is the role of YourKey.