Insurer heads say the customer is the winner of CMA’s recommendations
The CMA’s recommendations have been welcomed by some of the thought leaders in UK general insurance.
AXA underwriting managing director David Williams said “the devil is in the detail”, but at first glance, the cap was a “step in the right direction”.
He was not worried about the cap hurting insurers’ ancillary income, instead stressing that AXA had moved away from making cash out of things that were not in the best interest of the customer.
He said: “We have taken a stance on things that we have felt are not in the customers best interest. By not following people down the ancillary income road, it has resulted in us being in quite a good position.”
The CMA also proposes banning price parity agreements between comparison websites and insurers, known in the industry as most favoured nation status.
These agreements stop insurers from making their products available to consumers elsewhere more cheaply.
Williams said: “It will encourage aggregators to spend more time on fraud detection if you cannot command the best rates.
“It will help improve their proposition rather than relying on contractual agreements.”
Biba has said the plans could be good news for brokers.
Executive director Graeme Trudgill 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 about £40 to £50 per lead.”
Meanwhile, Markerstudy underwriting head Gary Humphreys said: “Credit hire agreements were dragged out and produced disproportionately large charges to insurers, so I don’t think it is much of a shock to the insurance-buying public, and it’s not before time really.”
He said that the negative effect on ancillary income will be outweighed by reduced claims costs.
“There are some insurers whose models rely heavily on claims income and that will inevitably have an effect on the income. The flipside of that argument is that where an insurer is the at-fault party, they will see claims costs reduce. The benefits will outweigh the losses,” he said.
And on the regulator’s efforts to improve customer information, he said: “It’s right and proper that we keep the customers informed throughout and many insurers have started to do that.”
ABI head of motor insurance James Dalton said the cap would help to reduce the often inflated bills from credit hire operators and should help to lower premiums.
“The insurance industry has supported the CMA investigation from the start and we welcome the CMA’s proposals which, if implemented, will help to reduce some of the unnecessary costs that insurers face and help lower premiums for motorists,” Dalton added.