CC probe: market distortions costing consumers as much as £200m a year

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.