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Car insurance market set for overhaul

24/09/2014

The car insurance market is set for an overhaul, following an investigation by the Competition and Markets Authority (CMA).

One the major changes will be a ban on exclusive pricing deals between insurers and price comparison websites.

The CMA said that these exclusive pricing deals meant that insurers could not make their products cheaper through other channels, such as alternative price comparison websites or their own website.

It was also announced that new rules would be introduced to force insurers to provide more information to consumers purchasing add-ons to their car insurance policies.

They said the changes could reduce the average car insurance premium by around £20 a year.

Overpaying



The CMA said that over 25 million private motorists in the UK are overpaying for their car insurance, and that changes need to be made to bring the costs down.

Speaking about comparison websites, Alasdair Smith, deputy panel chairman of the CMA said: "They certainly help motorists look for the best deal, but we want to see an end to clauses which restrict an insurer's ability to price its products differently on different online channels."

Mr Smith also revealed that insurers will be required to provide consumers with much clearer information around add-ons to car insurance policies, such as no-claims bonus protection.

He said: “The way motor insurance-related add-on products are sold makes it hard for consumers to obtain the best value. We are requiring insurers to provide much better information.”



Unable to resolve courtesy car issues



Despite being able to find resolutions to various issues in the car insurance market, the CMA claimed it would take a “fundamental change in the law” to solve issues surrounding courtesy cars.

At the moment, insurance premiums are pushed up because the insurer of a driver who is at fault in an accident has to pay for the other drivers courtesy car. However, the insurer of the not at-fault driver arranges the purchase of a replacement car, meaning that the insurer who is paying the bill is unable to search for the most cost efficient way of handling the situation.

The CMA said that whilst they would be unable to introduce changes to fix these issues, the problem isn’t actually as big as they first thought, and it only pushes up insurance premiums by around £3 a year.

Therefore, they said that this problem “does not warrant such a radical measure”.



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