12th Jun 2014 10:55
LONDON (Alliance News) - The UK competition regulator Thursday moved to try and reduce motor insurance premium costs, primarily by proposing a cap on the charges that are passed to the insurer of an at-fault driver for the cost of providing a replacement vehicle to the non-fault driver.
In a statement, the Competition and Markets Authority said it is also proposing to increase competition in the car insurance market and reduce the costs of premiums by banning price parity agreements between price comparison websites and insurers which stop insurers from making their products available to consumers elsewhere more cheaply, as well as ensuring consumers are better informed about the costs and benefits of no-claims bonus protection.
It said it would also recommend that the consumer credit regulator, the Financial Conduct Authority, looks at how insurers inform consumers about other motor insurance-related add-on products, particularly no-claims bonus protection.
"There are over 25 million privately registered cars in the UK and we think these changes will benefit motorists who are currently paying higher premiums as a result of the problems we've found," Alasdair Smith, chair of the private motor insurance investigation group and CMA deputy panel chair, said in a statement.
The regulator said it thinks that providing courtesy cars to non-fault claimants while their vehicles are repaired costs consumers between GBP70 million and GBP180 million a year.
"A cap on replacement vehicle costs will reduce the amounts charged to insurers of at-fault drivers, which will cut out some of the inefficiencies in the system and feed through to reduced premiums for all drivers," Smith said.
"Through the measures we propose to introduce, we will address the problems that stem from those managing the non-fault accident claim having little or no incentive to keep costs down," it added
The CMA said it thinks price comparison websites help motorists look for the best deal and have increased competition between insurers. However, it wants to end cosy deals which restrict an insurer's ability to price its products differently across different channels.
The regulator said it is also concerned about how so-called no-claims bonus protection is marketed to consumers. Drivers earn increasing insurance discounts, known as no-claims bonuses, the longer they go without making a claim. They can then pay to protect those discounts even if they do have an accident, ensuring that their premiums don't soar at the renewal following any accident.
"We find that there are particular problems in relation to no-claims bonus protection, where both the price of this product and its benefits are often unclear to consumers, and we believe insurers should provide much better information about it," said Smith.
The CMA said it hadn't considered personal injury claims in its investigation, given recent changes implemented by the Ministry of Justice, such as the banning of referral fees for such claims, and other changes being considered.
It also concluded that there was insufficient evidence of a problem in relation to competition with post-accident repair quality for it to intervene. It said it was still concerned about the arrangements that many insurers have in place for monitoring repair quality, which appear to rely too much upon consumers identifying repair deficiencies.
By Steve McGrath; [email protected]; @SteveMcGrath1
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