New Proposals To Cut Cost Of Motor Insurance
Competition and Markets Authority Proposals Radical Change
The Competition and Markets Authority has revealed a range of proposals relating to private motor insurance that could “reduce the cost of premiums”. The Authority hopes to increase competition too. Proposals include “a cap on the charges passed to the insurer of an at-fault driver “ - after an accident - “for the cost of providing a replacement” car to the innocent party. Prices should then “more closely reflect the costs incurred” that can appear disproportionate. This, of course, should reduce premiums (assuming any saving is passed on). Other proposals include: “better information for consumers about their rights following an accident”. The Authority has also recommended a “ban on price parity agreements between price comparison websites and insurers” that stop insurers making their products available more cheaply elsewhere. There should also – it has been argued - be “better information for consumers on the costs and benefits of no-claims bonus protection. Finally, the Financial Conduct Authority should consider “how insurers inform consumers” about insurance related add-on products. The Competition and Markets Authority – which replaced the Competition Commission in April 2014 - is now consulting on these measures before any final decisions are announced in September 2014. Interested parties have until July 4th 2014 to express their views by post and e-mail.
Competition and Markets Authority Representative Discusses Private Motor Insurance
Alasdair Smith, Competition and Markets Authority Deputy Panel Chair, said: “There are over twenty-five 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. 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.” Mr Smith added: There also need to be improvements to the way price comparison websites operate. We believe they are great in helping motorists look for the best deal and this, in turn, has driven insurers to compete more intensely. But we want to see an end to clauses which restrict an insurer’s ability to price its products differently (whether on different price comparison sites or on other channels).” Mr Smith continued: “We also find that the way motor insurance-related add-on products are sold makes it hard for customers to obtain the best value. 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. Insurers should provide much better information about it”, Smith concluded.