But insurers will still not be able to offer prices cheaper through their direct site
The Competition and Markets Authority (CMA), formerly the Competition Commission, has proposed a ban on aggregators limiting the price thatinsurers can offer to its customers.
Wide most favoured nation clauses (MFNs) stipulate that insurers cannot offer policies cheaper through other price comparison websites (PCWs) or alternative channels, but the CMA is moving to outlaw the practice.
But it has not gone as far as banning narrow MFNs, so aggregators can still ask insurers to sign contracts banning them from offering policies cheaper through their own websites.
In its report released today, the CMA said: “Wide MFNs restrict price competition between PCWs, restrict entry to the PCW market, reduce innovation by PCWs and increase premiums.”
Biba executive director Graeme Trudgill, who gave evidence at the previous Competition Commission hearings, said: “This is a well-balanced response from the CMA. If a customer walks into a broker’s office, we believe they should be able to offer the premium at a cheaper price than on a comparison site which typically charges around £40 to £50 per lead.”
The CMA said that 18 out of the 19 insurers and brokers who responded to the consultation supported the ban, with only CompareTheMarket.com owner BGL Group opposing the move.
Furthermore, seven of the 18 supporters also called for narrow MFNs to be included in the ban.
AA Insurance director Simon Douglas said: “The CMA should have gone further by banning agreements that prevent insurers from offering cheaper premiums on their own websites than those offered on comparison sites. This would have had a much greater impact on reducing premiums for many customers and is a missed opportunity.”
But the CMA said: “Narrow MFNs have only limited anticompetitive effects and there would be a risk to the survival of PCWs without them.”
The CMA was, however, concerned by PCWs taking other actions to ensure insurers offer them the lowest price for their policies.
In its response to the CMA consultation one insurer said: “We have been verbally advised by senior executives at one PCW, since the publication of the Competition Commission’s findings, that it is the PCW’s own choice who they have on their panel and they can delist a provider if they feel they are not offering, what is, in their view, the ‘best customer proposition’. We have been advised that if we present cheaper prices on a rival PCW that this may be considered that we are not offering their customers the best proposition and they would consider whether we were an appropriate partner for their panel.”
As a result, the CMA has also moved to ban alternative actions that aggregators could take to obtain the lowest price, including:
- delisting of an insurer;
- offering less-favourable commission terms;
- offering less-favourable solicitation rights;
- unreasonable IT change lead-times;
- changes to the timeliness, cost and quality of market intelligence; and
- introducing other additional charges.