Is cheaper car insurance around the corner?

Motorists could benefit from further cuts to insurance premiums following the publication of a report into the market by the Competition and Markets Authority (CMA).

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The CMA wants:

-a ban on agreements between certain price comparison websites and insurers which stop insurers from making their products available more cheaply elsewhere;

-better information for consumers on the costs and benefits of no-claims bonus protection;

-an examination by the  Financial Conduct Authority (FCA) into the sale of ‘add-ons’ on car insurance policies. It says limited information regarding add-on products such as legal expenses cover makes it difficult for consumers to compare the costs and benefits.

The agreements between certain price comparison websites and insurers – long criticised by MoneySuperMarket – have been deemed anti-competitive because they force insurers to charge the same price via every outlet.

If the insurer declines to enter the agreement, the comparison site in question refuses to sell its policies, reducing its access to market.

Free negotiations

Our view is that each site should be free to negotiate with insurance companies to achieve the lowest possible price for its customers.

Peter Plumb, MoneySuperMarket’s chief executive officer, said: “We welcome this move by the CMA, which will help bring car insurance prices down for consumers.

“The removal of clauses from some price comparison website contracts, which prevent insurers from offering a cheaper premium through another price comparison website, is a good thing.

“Unlike some other comparison websites, MoneySuperMarket does not use these clauses in its contracts. We can now work even harder with our motor insurance partners to bring even cheaper premiums to more of our customers.”

Post-claims costs

The CMA also looked at the way costs are amassed and paid following an accident.

There is broad concern that costs such as replacement hire car fees for the not-at-fault driver, which are paid by the at-fault driver’s insurer, are routinely exaggerated.

The CMA acknowledged ‘inefficiencies in the supply chain’, stating:

“The amount which at-fault insurers have to pay for temporary replacement cars provided to not-at-fault claimants is significantly more than the cost of providing these services.”

These inefficiencies inevitably feed into car insurance premiums.

No remedy

Surprisingly, the CMA has concluded that there is no effective and proportionate remedy to these problems.

It says it investigated several possible options, such as having the not-at-fault driver’s insurance cover the cost of the replacement car, or capping the amount which could be recovered from an at-fault insurer.

But it found that “these remedies would require a significant change in the law, which was not warranted since the problem caused an increase in the average premium of only £3 per year.”

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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