OFT warns insurers to limit price data exchange

The Office of Fair Trading (OFT) has warned a group of insurers and IT software and services providers to limit the amount of pricing data they exchange between them.

IT providers Experian and SSP, and seven motor insurance companies, have given formal commitments to the OFT to stop accessing competitor’s pricing data unless certain conditions have been satisfied. This was after an OFT investigation found that there was an increased risk of price fixing among insurers who used a market analysis tool by Experian called Whatif? Private Motor.

The insurers include Ageas Insurance, Aviva, AXA Insurance UK, Liverpool Victoria Friendly Society (LV=), RBS Insurance Group, Royal Sun Alliance and Zurich Insurance.

Although the regulator said it only investigated a small number of parties to reach a quicker outcome, it believed that the investigation could have wider implications as the insurance industry uses a number of tools similar to the Experian application.

The Experian software enabled insurers to see the pricing information they and their competitors supplied to brokers.

The OFT said that this information raised competition law concerns for a number of reasons. These included the fact that the information being exchanged was not genuinely public information, and that insurers were able to access their competitor’s future pricing plans because the data went live before the pricing went ‘live’ in insurance policies sold by brokers.

In their commitment to the OFT, the nine companies have proposed to exchange the pricing information using the analysis tool only if it is made anonymous, aggregated across at least five insurers and is already ‘live’ in the policies sold by brokers.

The OFT is currently consulting on the draft text of the formal commitments proposed. If they are accepted, the regulator said it will terminate its investigation.

Clive Maxwell, executive director at the OFT said: "The OFT treats possible breaches of competition law very seriously, but we believe that formal commitments in this case would be a proportionate way of resolving our concerns.

“We are aware that similar market analysis tools exist both in motor and other insurance markets and we urge companies using them to ensure that they are complying with competition law."

Copyright © 2011 IDG Communications, Inc.

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