Car insurance too high, says Competition Commission

17th Dec 2013 13:12

The UK competition watchdog is planning new measures to reform the car insurance market after its investigation into the industry found the cost to consumers was too high.The Competition Commission said drivers were footing the bill for unnecessary costs incurred during the claims process following an accident, with insurers pushing up the cost of repairs and replacement cars.The Commission also raised concerns about the contracts between price comparison websites and insurers, criticising comparison sites for demanding exclusive deals as this can reduce competition and inflate premiums.The contracts between price comparison sites and insurers can require that individual insurers' premiums are not offered more cheaply elsewhere, which the commission acknowledged was acceptable to some degree in order to ensure that these sites can continue to provide a beneficial service. Deputy Chairman Alasdair Smith, chair of the private motor insurance investigation group, said: "There is insufficient incentive for insurers to keep costs down even though they are themselves on the receiving end of the problem."He added that the investigation also found the way add-on insurance products were sold made it hard for customers to find the best-value products."We are now considering a range of possible measures, some of them far-reaching reforms, to ensure that the market better serves the interests of customers."In a statement put out by FTSE 250-listed MoneySupermarket.com, Chief Executive Peter Plumb complained that some price comparison website competitors have "tried to stop us [providing cheaper prices] by using clauses that force price parity across all price comparison websites and therefore prevent an insurer offering a lower premium through us"."We are delighted that the Competition Commission is proposing to stop this practice by some of our competitors. This is good news as it will allow us to offer better prices for the same cover to even more customers."Shares in esure were down 2.9%, while Admiral Group was down 2.2%, Direct Line 0.6% lower and MoneySupermarket down 1% at 13:45 on Tuesday. OH