OFT Consults on Amendment to Commitments Offered in Motor Insurance Case

Jack Humphrey, Regulatory journalist
September 30, 2011 /

The Office of Fair Trading (OFT) has opened a consultation on an amendment to commitments offered by a number of motor insurance companies designed to address competition law concerns about the potential exchange of pricing data between competitors.

An OFT investigation raised concerns that, by subscribing to an analysis tool, seven insurance companies were able to access not only the pricing information they themselves provided to brokers through the software, but also pricing information supplied by competing insurers.

The analysis tool was provided to insurers by an IT company, using information supplied to it by a second IT company.

The OFT warned the firms that, because of the nature of the information exchanged, there was an increased risk of price coordination.

Following its investigation, the OFT announced in January 2011 that it was minded to accept commitments as a means of addressing its concerns, and opened a consultation on draft commitments. As a result of the consultation, the OFT is now minded to accept an amendment to the draft commitments which will reduce the age of the data that can be exchanged via the analysis tool from 36 months to six months.

The OFT believes this less restrictive duration will ensure that a certain level of information remains available to potential new competitors, in particular small competitors, and will thus encourage entry into and healthy competition in this market.

However, the OFT remains of the view that all other requirements of the commitments offered by the insurer parties are necessary to remove the OFT’s competition concerns, including the requirements that pricing information must (i) be anonymised and aggregated across at least five insurers; and (ii) not be supplied to insurers until prices are already ‘live’ in policies sold by brokers.

The OFT is now consulting on the proposed amendment to the commitments, formal acceptance of which would result in the OFT ending its investigation.

The consultation on the amended commitments will close on 28 October 2011.

 

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