Insurers are facing sweeping changes to the way car insurance is sold after a two-year investigation by the competition watchdog.
Measures such as banning agreements between insurers and price comparison websites, and increased scrutiny of how add-ons to car insurance policies are sold to customers have been recommended by the Competition and Markets Authority.
The new measures aim to increase competition in the car insurance market and reduce premiums for drivers after an investigation prompted by the Office of Fair Trading.
Insurers will no longer be able to agree deals with online price comparison companies which offer exclusive prices that are unavailable more cheaply elsewhere.
The CMA also recommended the Financial Conduct Authority look at the way insurers tell customers about the additional products sold as add-ons to car insurance policies.
CMA deputy chairman Alasdair Smith said:
There need to be improvements to the way price comparison websites operate. They certainly help motorists look for the best deal, and this in turn has led 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 on different online channels. We expect this to lead to greater competition between price comparison websites.
The way motor insurance-related add-on products are sold makes it hard for customers to obtain the best value. 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 are requiring insurers to provide much better information. We would also like the FCA, as part of its ongoing work on insurance add-ons, to consider how drivers could be better informed in making their choices.
The regulator decided against introducing measures to cap costs of courtesy cars however, despite finding the cost of replacement vehicles for drivers inflated.