A handful of renegade brokers have forced the Office of Fair Trading (OFT) to investigate dual pricing in the insurance market. The shock move threatens to kill off any chance of resolving the matter through open dialogue.


The unnamed brokers have contacted the OFT complaining that insurers, including Norwich Union – the only insurer the OFT will name – have flouted the new Competition Act by charging higher premiums through brokers than through their direct arms.

A handful of renegade brokers have forced the Office of Fair Trading (OFT) to investigate dual pricing in the insurance market.

The shock move threatens to kill off any chance of resolving the matter through open dialogue.

The unnamed brokers have contacted the OFT complaining that insurers, including Norwich Union – the only insurer the OFT will name – have flouted the new Competition Act by charging higher premiums through brokers than through their direct arms.

An OFT spokesperson said: "We have had complaints from a number of brokers over a period of time. Norwich Union has been named but so have a couple of other companies." RSA has also confirmed that it has been contacted by the OFT.

The move is not thought to be backed by any trade body. Broker trade body British Insurance Brokers Association (Biba) claims it took legal advice on such a challenge and was advised it would fail. "Given the advice we had, we decided it wouldn't be a good use of our members' money, but we will rapidly rethink that if the OFT decides to launch a full investigation," said Biba chief executive Mike Williams.

Andrew Paddick of the Institute of Insurance Brokers (IIB) also said the claim would fail. "It won't come to anything. You have to show somebody has a dominant position," he said.

NU issued a statement confirming the OFT had contacted it about the complaints. "We know the issue is an area of concern among a section of the broking community and it has been widely covered in the insurance trade press. At the moment there is nothing further to say, except that we shall be providing the OFT with a full briefing on NU's approach to pricing through its different distribution channels," it said.

The OFT has not launched a full inquiry. It first needs to establish whether the matter raises competition concerns. The normal trigger is if a firm has a 40% stake in the market concerned, but no insurer currently has that share of the motor market, even of the broker-sold motor market. RSA is, according to the latest ABI figures, the biggest player with just over 10% of the motor market. But the combined CGNU figure will be just over 20%. The only other concern is how it affects consumers, but the OFT said consumers could still get the cheaper quotes by going direct.

But the OFT's intervention could scupper plans to bring insurers and brokers together to thrash out a compromise to the dual-pricing issue. Insurance Times, with the support of Biba and the IIB was about to announce a one-day debate on the subject. Senior figures from the major insurance companies had indicated that they would be panellists to discuss dual-pricing and the service standards within the industry. Those invited included RSA, CGNU, Axa, and Zurich. Cornhill had also expressed an interest.

But with the threat of an OFT investigation, the event may have to be postponed as anything said during the debate could be subjudice.