CMA defends action on protected no claims bonus cover

Competition and Markets Authority (CMA) inquiry director Andrew Wright has moved to defend the watchdog in the face of criticism from brokers about the proposed changes to protected no claims bonus cover.

One large national broker has said the cost of the changes could amount to one third of its IT spend for 2015, but Wright said the changes were necessary as the product was largely misunderstood by consumers.

“No claims bonus protection is a complete black box,” he said. “We did a lot of consumer surveying, and consumers don’t understand no claims bonus protection. They don’t understand the value, they don’t understand what it protects and they don’t understand the price.

“The problem with no claims bonus protection is very significant. It is an add-on product that is bought by a lot of consumers where they don’t understand it. They think it does something different and they think it costs something other than it does.”

“We appreciate these are onerous and unwanted changes, but [they] will enhance competition and remove the information asymmetry that will then allow consumers to exercise their choice accurately,” he added.

But A-Plan group compliance director and fellow panellist Jonathan Cumpstey said too much information was not always the answer to improving customer understanding of a product, especially when the consumer was asking for quicker and easier sales processes.

“There is only so much information you can get across [in a sales call],” he said. “There is a small window of opportunity before the clients mind wanders, then they have the price and that’s all they want to know.

“We would all agree providing tables of information in a policy document is not the way to go. It’s after the event and we don’t want clients cancelling [policies], we want them to buy the product they want and the product they need.”

Former Sabre chief executive Keith Morris said the proposals were disproportionate and could lead to some brokers withdrawing protected no claims bonus cover, increasing instead of decreasing consumer detriment.

“Some brokers are now considering whether they will continue to offer the protection because it is too much of an issue to make the changes to implement your requirements,” he said. “It could be damaging to the consumer that we might have less cover as a result of this intervention.

“Just because the consumer doesn’t understand the cover doesn’t mean it isn’t good for them.”

Wright responded to the criticism by saying that it may be better if the product is not on offer if consumers do not understand the cover it provides.

“That is certainly a possibility, but it is hard to say that is more damaging than selling a product to consumers when they have no idea what it does,” he said.