Competition Watchdog to Cap Replacement Vehicle Costs

In a bid to lower car insurance premiums, the Competition and Markets Authority (CMA) has said that it will introduce a cap on the cost of courtesy cars.

The CMA said that replacement vehicles for non-fault claimants are costing consumers up to £180m a year.

"A cap on replacement vehicle costs will reduce the amounts charged to insurers of at-fault drivers, which will cut out some of the inefficiencies in the system and feed through to reduced premiums for all drivers," said Alasdair Smith, CMA deputy panel chair.

"Through the measures we propose to introduce, we will address the problems that stem from those managing the non-fault accident claim having little or no incentive to keep costs down," he continued.

The CMA, formerly the Competition Commission, also says that price parity agreements between price comparison websites(PCW) and insurers should be banned as they prevent insurers from offering their products cheaper elsewhere.

"We believe [PCW] are great in helping motorists look for the best deal, and this in turn has driven insurers to compete more intensely, but we want to see an end to clauses which restrict an insurer's ability to price its products differently, whether on different price comparison sites or on other channels," says Smith.

Furthermore, the regulator says that there needs to be more clarity in the information surrounding no-claims bonuses.

The CMA says that the price of the product and what it does for the customer is unclear.

"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," said Smith.