Households could have lost money due to a Compare the Market clause that prevented home insurers from listing lower prices on rival comparison websites.
Compare the Market’s so-called most favoured nation contract clauses stopped home insurers from beating prices listed on Compare the Market elsewhere, in a bid to stop rivals winning home insurance customers.
But the practice also meant that home insurers were more likely to pay higher commission rates to comparison sites, potentially passing on the extra costs to customers, according to the Competition and Markets Authority (CMA).
The regulator accused Compare the Market of breaking competition law today by using the clauses.
If enforced, its provisional decision today could see the comparison website fined up to 10 per cent of its annual worldwide turnover.
“Over 20m UK households have home insurance and more than 60 per cent of new policies are found on price comparison sites. Therefore it’s crucial that these companies are able to offer customers their best possible deals,” Andrea Coscelli, CMA chief executive, said.
“Our investigation has provisionally found that Compare the Market has broken the law by preventing home insurers from offering lower prices elsewhere. This could result in people paying higher premiums than they need to.”
Its findings today follow a market study the CMA conducted into comparison sites last year, which found that many people visit more than one comparison site as they shop for the best deals.
However, Compare the Market’s clauses would have stopped them from finding lower prices for the same provider listed on the comparison site’s own platform.
While Compare the Market hasn’t enforced the most-favoured nation clause for the last year, the CMA remains concerned that the consequences of the practice could continue to affect the insurance market.
The CMA’s provisional decision today could lead to a fine of up to 10 per cent of Compare the Market’s annual turnover if the regulator decides the comparison site has hurt UK competition.
A spokesperson for Compare the Market said: “We are disappointed by the CMA’s provisional findings.
“We will carefully review the evidence once we have access to it, and look forward to working with the CMA over the coming months to ensure a satisfactory outcome.”
The news comes after the Financial Conduct Authority launched a probe into home and motor insurance pricing practices earlier this week, warning that consumers were being harmed.