How divorce affects pensions: Earmarking
Following a year-long investigation, the Competition and Markets Authority (CMA) has concluded that the car insurance market is not adequately serving the consumer and needs to be more transparent. Its report, Private motor insurance market investigation, states that deals between car insurance companies and price comparison websites "restrict an insurer's ability to price its products differently on different online channels."
Comparison sites have become popular because they allow cost-savvy consumers to try and find the best deal, without talking to each provider individually. The problem is that they can stifle competition and increase prices, so a ban on deals between the sites and providers is expected to arrive next year and is hoped to increase competition and reduce prices. Of particular concern to many will be that just five companies operate 75% of the market, and smaller companies face a difficult barrier to entry as a result.
These suggestions are part of a wider conclusion that the industry needs more transparency, including a new rating system so consumers can see how an insurance company performs on factors other than price, as well as an improvement on the products being offered. For example, it was found "that consumers faced difficulties in comparing the price and terms of their chosen add-ons across different providers."
Improved information on no-claims bonuses (NCB) has also been required, and the CMA has stated it wants "insurers and brokers to provide information to consumers on the implied price of NCB protection, the average NCB discount according to the number of NCB years, and 'step-back' procedures (i.e. what happens to the number of NCB years with and without NCB protection in the event of one or more claims)."
Consumers will embrace this news, and we welcome moves to protect the public from hidden costs. The financial industry has long been the subject of restrictions that aim to protect consumers, and the Retail Distribution Review (RDR) brought big changes when it arrived on December 31st 2012.
RDR mandated that all charges must be explicit, so customers know exactly what is being paid upfront and will no longer be tricked by 'free' advice that is actually paid for by adviser commission or complex product charges. The legislation also stated that charges need to be agreed in advance. Part of the result of this is that banks no longer offer financial advice, while many advisers have focused on the high net worth market where they can charge high fees.
But Portafina's ethos has always been to treat the customer fairly, and have always been upfront on charges. Unlike some other organisations, we did not have to change our business as a result of RDR.
Transparency empowers the customer and usually rewards the best businesses too, so it can only be a good thing that scrutiny is being applied to other industries. This means the public can be further protected, and not pay higher fees for secret and complex charging structures.
What do you think about the CMA's decision? Let us know with a comment below.
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