Insurers and brokers have criticised the Competition and Markets Authority at a hearing consulting on the implementation of the new rules
The Competition and Markets Authority (CMA) has come under fire from insurers and brokers for its changes to the way no claims bonus protection is to be sold.
The changes will require motor insurance providers to notify consumers of the details of the no claims bonus protection through prescribed wordings or scripts.
At a hearing held by the CMA, ABI director of regulation Hugh Savill said that the prescribed nature of the information means it will not be effective at improving customer understanding of the product.
“We really do not understand why you (the CMA) have insisted on a prescriptive wording for this,” he said. “There is a long history of the FCA’s predecessor, the FSA, prescribing scripts that have to be read out over the telephone or notices that have to be provided in full. All of the evidence shows people do not read them.
“We think it would be greatly preferable if you should set an outcome and leave it to companies to choose how that outcome is met.”
Biba executive director Graeme Trudgill also said that the nature of the information in the wording would not be easily obtainable for brokers in an easy to understand way, and that providing the full information could increase customer confusion.
“A number of insurers informed [our members] they have very complex rules that cannot be easily laid out and the discount varied according to the age of the driver with some insurers,” he said. “Therefore, to try to show a calculation as proposed in the draft order, could potentially lead to customer confusion and would, therefore, not provide the CMA with the clarity they are seeking.”
Timescales too tight
[This] could lead some brokers to stop selling no claims bonus protection and distort competition, as they cannot comply with the timescales.”
Graeme Trudgill, Biba
The proposed changes are expected to come into force from 1 September, but Trudgill said estimates for timescales for making the required technological changes currently stand at 16 months.
“The insurance industry’s Electronic Trading Practices Group (ETPG) has put together a working party to consider the draft order and their main concern is the timescale,” he said. “They have stated that it is likely to take up to 16 months for the changes to be implemented in the broker channel in full.
“[This] could lead some brokers to stop selling no claims bonus protection and distort competition, as they cannot comply with the timescales.”
Compliance with the new rules will also be monitored by the CMA through the filing of an annual report, but Savill said that such reporting should be handled by the FCA alongside its other regulatory duties.
“It makes more sense for this to be done by the FCA along with the many other regulatory returns we do for the FCA than by the CMA,” he said.