Insurance crackdown could hit industry hard

The partner at law firm Dentons said a ban on “most favoured nation” deals, which allow insurers to offer their cheapest deal to just one aggregator site, could be “read across” to other forms of insurance in the medium term.

He said: “The most favoured clause was not generally thought of as anti-competitive; to suggest it can be is a development.”

Last week the Competition and Markets Authority announced it would ban these agreements after it found evidence they “suppressed competition on price”.

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Earlier this month, Martin Wheatley, chief executive of the FCA, which gets powers to regulate competition in April next year, spoke at the regulator’s general insurance conference.

He said: “Products are now being developed in different parts of the industry, with multiple routes to consumers. This is where it becomes less certain whether these structures are delivering good outcomes for consumers, or indeed having an impact on the effective functioning of the market.”

Adviser view

Justin King, director of Dorset-based MFP Wealth Management, said: “This raises more questions than answers. Insurers can differentiate price depending on how much risk a customer represents collectively, but for the consumer it is highly confusing.

“However, on the flip side, it can allow greater innovation on the provider side, where specialists can develop products that are priced more appropriately for specific customers.”