Antitrust focus on insurance: a CMA super-complaint and FCA market study 

United Kingdom

On 28 September 2018, the Financial Conduct Authority (FCA) announced that in the next few weeks it would launch a market study looking at pricing practices in the general insurance industry, in particular in relation to home and motor insurance. This announcement coincides with the launch of a preliminary Competition and Markets Authority (CMA) investigation of a super-complaint which alleges that long-term customers are overpaying for key services, including savings accounts, household insurance and mortgages.

The FCA’s market study announcement was trailed in the 2018/2019 Business Plan where the FCA noted that it was considering the pricing practices of general insurance firms. The market study will provide it with an opportunity to examine how general insurance firms charge their customers for home and motor insurance, including issues it says it has “already identified” in the market. The FCA states that it will publish the terms of reference for the market study in the coming weeks. These will set out more precisely the scope of the study and further detail on the issues which the FCA wants to look at. Since acquiring competition law powers in April 2015, the FCA has carried out a number of market studies to examine competition issues in further detail across various markets.

The FCA will also work closely with the CMA as it investigates the super-complaint submitted by Citizens Advice. A super-complaint is a complaint submitted by a specially designated consumer body which alleges that any feature (or combination) of a market is or appears to significantly harm the interests of consumers. It is intended to be a fast-track process to bring issues affecting consumers to the attention of the CMA. The CMA has a duty to consider the complaint and publish a reasoned response within 90 days (unlike standard complaints which give the CMA discretion not to act or respond). Outcomes includes enforcement activity under competition or consumer protection legislation, a market study or more in-depth market investigation, agreeing voluntary changes with the industry and/or recommendations to government or other organisations (among others).

Citizens Advice has identified five key markets where it has raised concerns that long-term customers are paying more for goods and services (referred to as the “loyalty penalty”): mobile, broadband, savings accounts, mortgages and household insurance. The CMA will consider these issues carefully and is inviting evidence and views on the concerns raised.

As a result of both these developments, the insurance sector (and more broadly financial services) will be subject to a high degree of scrutiny by the regulators. Firms will have to look carefully at their business models and practices to ensure they are not at risk of falling foul of competition (or consumer protection) law.