CMA probe: Insurers disappointed ban on aggregator pricing arrangements didn't go further

Insurers are disappointed that the Competition and Markets Authority (CMA), formerly the Competition Commission, has not gone further with its actions against aggregators’ restrictive pricing agreements.

Under the CMA’s current proposals, released today, price comparison websites (PCWs) will still be able to stop insurers offering cheaper policies through their direct website.

But insurers say these types of agreement, known as narrow most favoured nation clauses (MFNs), are inherently anti-competitive and should be banned.

Direct Line Group commercial director for motor insurance Gus Park said: “We are disappointed that they didn’t go as far as banning narrow MFNs although it is very good news that they want to ban wide MFNs.

“We hoped they would’ve gone further, as any kind of MFN clause is essentially problematic. We want PCWs to be competitive with each other. MFN clauses, both wide and narrow, run the risk of dampening that competition.”

A spokesman for the ABI said it had also been pushing for a blanket ban on the clauses.

In response to the criticism, Alasdair Smith, who led the CMA investigation, told Insurance Times that narrow MFNs are vital for protecting the future viability of the aggregator business model.

“Any anticompetitive effect that narrow MFNs have is outweighed by the benefit of the PCW model,” he said. “PCWs have greatly increased the level of competition in this industry to the benefit of consumers. The PCW model is vulnerable to people using PCWs just to shop around and then buying the product directly.

“We don’t want the PCW model undercut so that’s why we thought it was right to allow the narrow MFNs to be retained.”

But Park says this decision was based on evidence that isn’t relevant to the current state of the UK market.

“It is not a very material risk (PCWs business models being put under threat),” he said. “PCWs are very well established in this market. Consumers use them very widely and would continue to use them with or without narrow MFNs.

“The CMA draws a parallel with Italy and raises the concern that PCWs struggled to take hold there because they didn’t have the protection of narrow MFNs, but that is a very different situation. In the UK market PCWs count for the majority of motor insurance sales and they are not going to lose that market position overnight.”