6 Insurers, 2 IT Firms to Limit Data Exchange

Jay Decenella, IT audit expert
December 14, 2011 /

Six insurance companies and two IT software and service providers have agreed to limit the data they exchange between them, commitments accepted by the Office of the Fair Trading (OFT).

The companies that agreed to the commitments following an OFT consultation include Insurers Ageas Insurance Ltd (formally Fortis Insurance Ltd), Aviva Insurance UK Ltd, AXA Insurance UK plc, Liverpool Victoria Insurance Company Ltd, RBS Insurance Group Ltd, and Zurich Insurance plc – UK Branch; and IT software and service providers Experian Ltd and SSP Ltd.

In the light of responses to its first consultation in January 2011, the OFT held a second consultation in September 2011 on amended commitments offered to the OFT by six of the seven insurers party to the investigation. These are Ageas Insurance Ltd (formally Fortis Insurance Ltd), Aviva Insurance UK Ltd, AXA Insurance UK plc, Liverpool Victoria Insurance Company, RBS Insurance Group Ltd and Zurich Insurance plc – UK Branch. The remaining seventh insurer is bound by the terms of its immunity agreement. The commitments offered by Experian Ltd and SSP Ltd were not subject to an amendment.

An OFT probe found increased risk of price coordination among motor insurers using a specialist market analysis tool provided by Experian called Whatif Private Motor.

The Competition Act 1998 prohibits anti-competitive agreements and conduct amounting to an abuse of dominance within the UK. The Chapter I prohibition covers anti-competitive agreements and concerted practices that have the object or effect of preventing, restricting or distorting competition in the UK or a part of it and which may affect trade in the UK or a part of it.

The Act allows the OFT to accept binding commitments from those under investigation, although generally not for secret cartels (such as price fixing, bid rigging, establishing output restrictions or quotas, and sharing and/or dividing markets), nor in cases involving serious abuses of a dominant position. The formal acceptance of such commitments, which must address the OFT’s competition concerns, requires the OFT to close its investigation into the conduct addressed by the commitments.

The Experian tool allowed insurers to access pricing information supplied by other competing insurers, on top of the pricing information they themselves provided to brokers.

The OFT warned the firms that, because insurers were able to access information about their competitors’ future pricing intentions, the information exchanged through WhatIf? Private Motor raised competition law concerns, in particular that it could potentially be used to coordinate on price.

The formal commitments address these concerns by ensuring that the companies will exchange pricing information through the analysis tool only if that information meets certain principles agreed with the OFT, the trading regulator said.

These principles require the information, if less than six months old, to be anonymised, aggregated across at least five insurers and already ‘live’ in broker-sold policies.

Having accepted the commitments, the OFT has decided to end its investigation and not to proceed to a decision on whether or not the Competition Act has been infringed.

“The exchange of future pricing data between competitors has the potential to dampen competition, preventing customers from getting the best value,” Clive Maxwell, Executive Director at the OFT, said.

“We have been able to address our concerns by accepting commitments that reflect the specific features of this market. These limit data sharing while ensuring a certain level of information remains available to potential new competitors, in particular smaller firms, to encourage entry into and healthy competition in the market.”

 

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