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Saturday, January 15, 2011

Motor insurance firms banned from checking premiums of rivals

Motor insurance firms banned from checking premiums of rivals : A burgeoning and possibly illegal price cartel for car insurance has been stopped in its tracks by the Office of Fair Trading (OFT). Software created by online credit-rating company Experian was being used by motor insurance firms to trade private information with each other on different classes of driver and premiums.

From the information gained, companies were able to fix prices, ensuring similar charges and stifling competition. As a result, motorists shopping around for the best deal on their car insurance were unable to access any potential for money-saving.

Yesterday the OFT revealed seven motor insurance companies and two partner firms had been forced to agree to limit the sharing of private information on premiums. The companies involved are Ageas, Aviva, AXA, RBS, Royal Sun Alliance, Zurich and the Liverpool Victoria Friendly Society. All have been using the Experian software to compare premiums across the range offered, allowing them to charge similar amounts to their rivals thus keeping premiums artificially high.

All the firms, together with Experian, have agreed as required by the OFT to sign a legal document preventing the sharing of detailed information in the future. Watchdog Consumer Focus has welcomed the move, but suggests it should go further. A policy expert at the watchdog, Rupert Roker, said the practice had been very bad news for customers as it reduced genuine competition to a very low level.

Mr Roker added he hoped the OFT would extend its attention to other forms of insurance also using similar analysis tools to artificially hike prices. Not surprisingly, however, although the software also allowed insurers to check on rivals’ anticipated price rises and adjust their prices to match, the OFT will not be prosecuting the companies involved although the practice would appear to breach competition law. For the latest updates PRESS CTR + D or visit Stock Market news Today

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