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Insurance comparison site ComparetheMarket has been issued with a “statement of objections” by the Competition and Markets Authority (CMA) after an investigation found that clauses in many of ComparetheMarket’s contracts with home insurers break competition law and could lead to higher premiums.
The CMA has provisionally found that ComparetheMarket’s so-called “most favoured nation” clauses, which prevent home insurers from quoting lower prices on rival comparison sites and other distribution channels, could lead to customers missing out on cheaper premiums.
According to the CMA, the clauses block fair market competition and also make it more likely that insurance companies have to pay higher commission rates to comparison sites, with the extra costs potentially impacting end-consumers.
“Over 20 million UK households have home insurance and more than 60% of new policies are found on price comparison sites. Therefore, it’s crucial that these companies are able to offer customers their best possible deals,” said CMA Chief Executive, Andrea Coscelli. “Our investigation has provisionally found that ComparetheMarket has broken the law by preventing home insurers from offering lower prices elsewhere. This could result in people paying higher premiums than they need to.”
CMA market research into digital comparison tools has shown that many consumers visit more than one comparison site before making an insurance purchase decision, making fair practices essential.
James Dalton, director of general insurance policy the Association of British Insurers commented: “It’s good to see the CMA investigating this and taking action. Price comparison websites can help consumers shop around for a good deal, but it is important that their rules don’t restrict customer choice.”
ComparetheMarket now has an opportunity to respond in detail to the CMA’s “statement of objections.” The CMA will consider the response and any further evidence before reaching a final decision.
