It has been reported recently in the Insurance Times that the Office of Fair Trading (OFT) has closed its investigation into price coordination between motor insurers. This follows an investigation identifying an increased risk of coordination of pricing among motor insurers, using a specialist market analysis tool provided by Experian called Whatif? Private Motor.

After accepting formal pledges from six insurance companies and two IT software and service providers, the watchdog announced that it has closed its probe after they agreed to limit data swaps between them

Household names Ageas, Aviva, AXA, LV=, RBSI, and Zurich have all agreed to the commitments after consulting with the OFT. In addition, IT software and service providers Experian and SSP have also made formal commitments.

The investigation identified a significant danger of price coordination (not fixing) among those who used this Experian tool, allowing insurers to access not only the pricing information they themselves provided to brokers, but also pricing information supplied by other competing insurers. 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.

These formal commitments address these concerns by ensuring that the companies will exchange pricing information through the analysis tool only if that information meets certain criteria agreed with the OFT. If this information is less than six months old, these principles require to be made completely anonymous, aggregated across at least five insurers and already ‘live’ in broker-sold policies.

These commitments and The OFT’s decision to investigate was correct as customers paying for even a 1 day car insurance policy could potentially be at a disadvantage if an insurer knew of another insurers intentions.

The office of Fair Trading has ended its investigation and will not be proceeding to a decision on whether or not the Competition Act has been infringed, having accepted the insurer and IT firm commitments

According to the Insurance Times, Clive Maxwell, executive director at the OFT, said: ‘The exchange of future pricing data between competitors has the potential to dampen competition, preventing customers from getting the best value.

“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.