Car insurance: How to avoid common confusionsWhich? reacts to CMA investigation

30 September 2014

Woman phones insurer after car crash

A number of common misperceptions experienced by those buying car insurance were identified in a report by the Competition and Markets Authority (CMA) last week. 

The government department listed price parity clauses and information about add-ons among its list of areas of the car insurance market that need to be improved.

Here, we break down the key areas of car insurance that are set to change and suggest what motorists can do in the meantime to ensure they get the best deal. 

Find out more: How to get cheap car insurance - a host of useful tips 

Price parity clauses

'Price parity' or 'most favoured nation' clauses are sometimes contained within contracts between insurers and price comparison website. Where in place, these agreements prevent the insurer from selling its policies more cheaply elsewhere - for instance, direct through its own website, or through a rival comparison site.

The issue

The CMA found that these contracts restrict competition in the market - as price comparison sites using the clauses are protected from having their prices undercut by competitors. This creates a risk of insurance premiums being unnecessarily high.

What can motorists do? 

The CMA is banning use of the clauses. In the meantime, motorists should browse a number of price comparison websites as well as going direct to insurers themselves to ensure they are getting the best deal. 


Insurers and brokers will typically attempt to nudge you into buying a host of optional elements of cover and additional policies - known as 'add-ons' - when selling you insurance. These can include legal expenses insurance, courtesy car cover, European cover, breakdown insurance and no-claims bonus protection (NCBP). 

The issue  

Insurance add-ons are often bundled into the main purchase with minimal or unclear information given about what they're adding to the cost and what benefits they provide. In a review earlier this year, the Financial Conduct Authority (FCA) estimated that across insurance generally, this lack of transparency was costing consumers between £108m and £200m per year. 

The CMA's study has concluded that insurers should aim to provide better information to enable customers to make informed decisions about the value of add-ons, singling out NCBP as having 'particularly significant' issues.

What can motorists do? 

The CMA has set out measures exclusively for NCBP (see below) - but has also recommended that the FCA continues to look at how insurers inform consumers about other products sold as add-ons to car insurance policies. 

In the meantime, it's worth checking our guide to car insurance add-ons to get a better idea of which products are worth paying for. 

No-claims bonus protection

Insurers sell NCBP for a relatively small addition to your premium. If you have this protection, you will be able to make a limited number of claims without your bonus being affected. Many will cover up to two claims over a three-year period. 

Like all types of insurance, some providers are more generous than others. When we examined the market in June, we found that Nationwide, LV, Chaucer Direct, Esure, More Than and Sheila's Wheels offered versions of NCBP covering an unlimited number of claims in a year. But at the other end, providers including Kwik Fit, Endsleigh and Saga provided NCBP protecting just two claims over five years.

The issue 

While NCBP seems straightforward in principle, what's not so simple is working out whether it's worth the extra cash.

  • NCBP cover won't stop your premium going up - it protects the discount, not the underlying price.
  • Many insurers don't give information showing how much discount you could lose by making an unprotected claim.
  • Some insurers don't provide upfront information on the number of claims their NCBP will protect.

What can motorists do? 

The CMA has instructed insurers to make a number of changes to ensure that consumers get better information.

Under the new rules, insurers will have to disclose guidance about how your bonus can increase from year to year on their policies. They will also be required to provide an illustration showing how much bonus you would lose were you to make claims with and without protection in place.

In the meantime, it's worth taking a look at our car insurance company reviews to learn more about how your company handles no-claims bonuses. 

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