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Motor insurance sector faces shake-up by competition regulator

Price parity clauses between motor insurers and price comparison websites are being banned after the competition regulator ruled they restricted competition and led to higher car insurance premiums overall.

The ruling was one of a number of measures recommended by the Competition and Markets Authority in its final report into the £11bn private motor insurance market.

It said some price parity clauses were preventing insurers from making their products available more cheaply on other online platforms.

However the issue of replacement car credit hire costs following an accident, which the CMA had hoped to cap, has been ruled too complex for it to tackle.

The CMA said this issue requires a fundamental change in the law.

The CMA said it will ensure drivers get better information about the costs and benefits of the add-ons they buy with their car insurance policy – in particular no claims bonus (NCB) protection, which is often misunderstood, the CMA said.

“The way motor insurance related add-on products are sold makes it hard for customers to obtain the best value,” said Alasdair Smith, chairman of the CMA's private motor insurance investigation group.

“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 period but are expected to be implemented in early 2015.

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