Competition watchdog’s report into ComparetheMarket offers a damning verdict on a company abusing its power
By content director Saxon East
You hear the whispers, but you’re never really sure - some insurers hate price comparison websites.
Well now we know why.
The competition watchdog’s fine and damning report into the behaviour of ComparetheMarket reveals a company with a dominant market share abusing its power.
The report shows the aggregator, with its 50% market share, holding a big stick over home insurers, ready to bring it down on anyone who fell out of line.
The aggregator, like a strict headmaster watching over its pupils, made clear to insurers the importance of complying with its wide ’most favoured nation’ status contracts - something it was not allowed to do.
It ‘monitored and enforced’ compliance, questioning insurers and requiring action.
ComparetheMarket refused to remove the wide clauses - which meant its pricing could not be undercut on rival aggregators - despite pleas from insurers keen to offer customers across the market cheap home insurance deals.
Because of its huge market share, insurers had to comply - or face being delisted.
The aggregator thwarted competition, meaning rival aggregators were unable to offer cheaper prices, resulting in higher commission fees for itself, the CMA probe reveals.
ComparetheMarket claims it is a force for good in offering competitive prices and strongly disagrees with the report. It is considering all its options.
Customers lost out
Well, the aggregator better come up with something convincing to clear its name.
The Competition and Markets Authority is a powerful statutory regulator. Generally speaking, its word is accepted.
The only conclusions you can get from the report is that this is a case of greed, abuse of power and disregard for the customer.
People on low incomes and the young could have been offered cheaper home insurance quotes if it were not for ComparetheMarket’s contracts.
Rival aggregators lost potential business from not being able to offer their customers the best deal.
And let’s not forget, that the FCA investigation into retail pricing shows home aggregators taking home 50% profit margins in 2018. Home insurers took home just 2%.
The contracts were no good for anyone, apart from ComparetheMarket’s shareholders and their profit-seeking managers.
The CMA says: ”Internal documents record that CTM believed that, without wide MFNs, there would have been greater competition between PCWs, putting greater pressure on commission fees and reducing CTM’s profits.”
If left unchallenged, this is a shameful abuse of power that will stick long in the memory.
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