CC probe: add-ons 'distort competition' in motor market

In its initial findings published today the Competition Commission (CC) probe into the private motor insurance market says the sale of add-ons makes it hard for consumers to find the best-value products.

The add-ons investigated include motor legal expenses insurance, personal injury cover, courtesy car cover, key loss cover, extended foreign use cover and no-claims bonus (NCB) protection.

The report found two features in the supply of add-ons that have an adverse effect on competition – information asymmetries between motor insurers and consumers in relation to the sale of add-ons and the point-of-sale advantage held by motor insurers when selling add-ons.

It provisionally concluded that “these features distort competition in the motor insurance market and result in detrimental effects on consumers because they mean it is more difficult for consumers to identify the best-value offers in the market and may lead to consumers buying products at inflated prices”.

The report suggested remedies to address the adverse effect on competition including:

• Provision of all add-on pricing from insurers to price comparison websites (PCWs), which would require each insurer to provide pricing information on all the add-ons it offers to the PCWs that list that insurer’s policy;

• Transparent information concerning NCB which would require all insurers to make available to consumers details of the NCB scales, both when choosing whether to take out NCB protection and when receiving their policy quotation;

• Clearer descriptions of add-ons, which would require all insurers to revise their descriptions of add-ons to provide the relevant information to the consumer and ensuring the information is “understandable and not unnecessarily complex”.

The industry has until 17 January to respond to the recommendations.