Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • September 2014
09

Competition watchdog ditches plans to cap replacement car costs

Open-access content Wednesday 24th September 2014 — updated 5.13pm, Wednesday 29th April 2020

The Competition and Markets Authority has back-tracked on plans to place a cap on replacement car and repair charges, which it originally thought would help steer down the price of premiums for UK motorists.

2

The decision drew accusations that the watchdog had 'ducked the challenge' and would be bad news for honest motorists.

 This summer, the FCA proposed that a cap be placed on the cost of replacement cars for at-fault drivers, but it subsequently found that such a measure would require a significant change in the law.

In its final report on the issue, published today, the CMA said the cap could not be justified as the problem only caused an increase in the average premium of £3 per year. It is, however, encouraging some action by those with the ability to make the market work better within the existing legal framework.

Alasdair Smith, chair of the private motor insurance investigation group and CMA deputy panel chair, said: 'We have looked very hard at resolving the problem with the cost of post-accident services to drivers who are not at fault in an accident, in particular temporary replacement cars.

'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 and, whilst this problem does increase premiums for motorists, the extent of the problem is not as high as was at first envisaged and does not warrant such a radical measure.

'However, we do wish to challenge the benchmarks typically used in awards for non-fault replacement cars, which do not reflect the cost of the services provided and which we think should be lower.'

Alongside this, the CMA published further measures which it expects will increase competition in the market and bring down premiums for drivers. The watchdog confirmed that it would ban exclusive pricing deals between motor insures and price comparison websites.  

The CMA said such deals were stopping insurers from making their products available more cheaply on other online platforms.

Also, it said better information on the costs and benefits of no-claims bonus protection should be provided to consumers.

The watchdog is recommending that the Financial Conduct Authority looks at how insurers inform consumers about other products sold as add-ons to car insurance policies.

Smith noted that the way motor insurance-related add-on products were sold made it hard for customers to obtain best value.

He said: 'There are over 25 million privately registered cars in the UK and we think these changes will benefit motorists who are currently paying higher premiums as a result of the problems we've found.'

Commenting on the report, the Association of British Insurers said the 'U-turn' on the proposed cap was likely to lead to higher charges for customers.

James Dalton, ABI's head of motor insurance, said: 'The fact that [the CMA] fails to do anything to address the excessive costs of replacement vehicles - a problem that the CMA itself identified - will be a bitter pill to swallow for honest motorists.

'The reality is that the CMA has ducked this challenge and when regulators fail, politicians need to step in to act.'

This article appeared in our September 2014 issue of The Actuary.
Click here to view this issue
Filed in
09

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Manager - Employee Benefits

£2958.18 - £3549.82 per month
Reference
145973

Manager - Employee Benefits

£2958.18 - £3549.82 per month
Reference
145972

Portfolio Management/Business Planning Actuary

London (Central)
£100000 - £125000 per annum
Reference
145971
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ