The Competition Commission found that practices in the motor insurance market are having an ‘adverse effect on competition’
The Competition Commission (CC) probe into the private motor insurance market has published its initial findings today and found that ineffectiveness in the market is costing consumers between £150m and £200m a year.
The CC found five areas of concern that it said were having an adverse effect on competition.
These areas include:
- a lack of consumer understanding regarding the legal entitlements following an accident;
- subrogated claims costs not being managed effectively due to at-fault insurers not controlling the credit hire and repair process for non-fault claimants;
- poor quality of credit repair services owing to insurers focusing too heavily on costs;
- a lack of clarity regarding add-ons at the point-of-sale; and
- most favoured nation clauses (MFNs) limiting the pricing ability of insurers and prohibiting competition.
In its report published today, the CC said: “We provisionally conclude that these features distort competition in the motor insurance market. We estimate a net adverse effect on consumers of between £150m and £200m per year.
“Since the estimated gross written premium across the industry is around £11bn, this net effect corresponds to 1.3% to 1.8% of the average premium, or about £6 to £8 per motor insurance policy.”
The commission has also published several possible remedies for consideration. These include:
- improved policy wording;
- greater control over costs for at-fault insurers;
- improved auditing of credit repairs;
- more information on the costs and limitations of add-on policies; and
- restricted use of MFNs.
More details to follow.