Millions ‘wasted’ on car insurance inquiry


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The Independent Online

Britain’s competition watchdog has been accused of wasting “millions of pounds” of taxpayers’ money as it unveiled the results of a lengthy inquiry into the £11bn motor insurance market.

The Competition and Markets Authority (CMA) said it planned to clamp down on the cosy relationship between insurers and price comparison websites in a move experts claimed could knock £20 off the price of a motor policy.

However, it backtracked on proposals to cap the cost of courtesy cars for drivers involved in accidents. Alasdair Smith, chairman of the private motor insurance investigation group at the CMA, said: “Reluctantly we have had to conclude that we cannot see an effective way of addressing this problem fully, short of a fundamental change in the law.”

This provoked an angry response from the Association of British Insurers, which responded: “[The] report is the culmination of three years’ of work and has cost taxpayers millions of pounds. The fact that it fails to do anything to halt the excessive costs of replacement vehicles … will be a bitter pill to swallow for honest motorists.”

The Lloyd’s Market Association said it would discuss the decision on replacement cars with its members and consider making an appeal. It claimed the current system creates unnecessary costs of up to £178m a year. Others claimed the CMA had ignored issues such as fraudulent whiplash claims.

The regulator plans to introduce a ban on so-called price parity clauses between comparison websites and insurers, which prevent insurers from offering products cheaper elsewhere. The Financial Conduct Authority is carrying out a separate investigation into the market for car insurance add-on products.  

In response to yesterday’s criticism, the CMA said the investigation had cost £2m and that the overall impact on premiums would offset the impact on taxpayers. A spokesman noted alleged frauds fall outside its competition remit, and added that the Ministry of Justice is already looking into personal injury claims.