On 13 January 2011 the Office of Fair Trading ("OFT") released a consultation notice setting out the formal commitments offered by seven insurance companies and two IT software providers in response to the OFT's competition concerns in relation to the exchange of pricing information.
The OFT launched a formal investigation in January 2010 into the use of third-party IT software in the insurance industry. The OFT looked specifically at the private motor insurance tool Whatif? which provided insurers with access to individualised information regarding the pricing of motor insurance in response to the different permutations of a consumer's risk profile. The OFT was concerned that this exchange of information may constitute a restriction of competition under Article 101 of the Treaty on the Functioning of the European Union.
The OFT was particularly concerned about the nature of the information. The OFT considered that the information was commercially sensitive given it detailed the individual insurer's pricing information in relation to most risk factors. This led the OFT to conclude that the information exchanged was not genuinely public information. Although it would, in theory, be possible to gather the information by searching for individual quotes from the insurers, this would be almost impossible in practice. The information was also highly disaggregated and provided data at an individual insurer level for almost all insurers. Further, the information related to future pricing, with data available two to three weeks before the prices went 'live'.
The OFT used its prioritisation principles by focussing on the Whatif? Private Motor tool and the top seven insurers in the motor insurance market in order to achieve an efficient outcome in a relatively short time-frame. The OFT emphasised in its notice that similar tools are used across the different insurance markets and the companies addressed constitute only a limited number of the total market participants. The insurers were Ageas Insurance Limited (formally Fortis Insurance Limited), Aviva plc, AXA Insurance UK plc, Liverpool Victoria Friendly Society, RBS Insurance Group Limited, Royal Sun Alliance and Zurich Insurance plc, and the IT software and service providers Experian plc and SSP Limited.
The OFT's notice addresses the formal commitments made by the parties which the OFT considers, on a preliminary view, would fully address the competition concerns. The commitments address the nature of the data, limiting the exchange to data that is not forward looking and is anonymised and averaged across at least five insurers. These commitments are subject to consultation, but if accepted will remain in force for five years.
To view Community Week, Issue 504; 14th January 2011 in full, Click here.
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