CMA Announces Car Insurance Shake Up

Consumers buying car insurance and breakdown cover have often found themselves confused. That’s why the Competition and Markets Authority (CMA) identified, and tried to tackle them, in a report published last week.

Price Parity Clauses

‘Price parity’ or ‘most favoured nation’ clauses are often included in contracts between insurers and price comparison sites. These agreements prevent the insurer selling its policies cheaper anywhere else, even through their own website.
The CMA found that these contracts restrict competition in the market, pushing premiums up.

The CMA is banning the use of these clauses, but for now, motorists should browse a number of comparison sites and approach insurers directly to make sure that you’re getting the best deal.

“There need to be improvements to the way price comparison websites operate,” chairman of the private motor insurance investigation group, Alasdair Smith, told The Guardian. “They certainly help motorists look for the best deal, and this in turn has led insurers to compete more intensely, but we want to see an end to clauses which restrict an insurer’s ability to price its products differently on different online channels. We expect this to lead to greater competition between price comparison websites.”


Some insurers and brokers will attempt to encourage you to buy optional policies. These can be everything legal expenses insurance, courtesy car cover, and no-claims bonus protection.

The FCA estimated that the financial cost across insurance generally costs between £108 million and £200 million per year.

The CMA’s study recommended that insurers should provide better information to enable customers to make better informed decisions.

“The way motor insurance related add-on products are sold makes it hard for customers to obtain the best value,” Smith said. “There are particular problems in relation to no claims bonus protection, where both the price of this product and its benefits are often unclear to consumers, and we are requiring insurers to provide much better information.”
The CMA measures are subject to a two month appeal, so they could change, but they are expected to be in force in early 2015.