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Courtesy car costs to be capped under new plans

Announced by the Competition and Markets Authority (CMA) – the replacement to the Competition Commission (CC), the measure would see a cap on the charges passed to the insurer of an at-fault driver in an accident for the cost of providing a replacement vehicle to the non-fault driver, to more closely reflect the costs incurred and remove significant inefficiencies.

The CMA added that its provisional findings report in December 2013 found that there was a significant difference between the costs incurred by at-fault insurers in providing a replacement vehicle and the costs charged to the at-fault insurer when the replacement vehicle was provided by others. The CC found that this difference had the effect ultimately of increasing the cost of PMI to consumers.

Other new measures proposed include better information for consumers about their rights following an accident and a ban on price parity agreements between price comparison websites and insurers which stop insurers from making their products available to consumers elsewhere more cheaply.

Alasdair Smith, chair of the private motor insurance investigation group and CMA Deputy Panel Chair, said: ‘A cap on replacement vehicle costs will reduce the amounts charged to insurers of at-fault drivers, which will cut out some of the inefficiencies in the system and feed through to reduced premiums for all drivers. Through the measures we propose to introduce, we will address the problems that stem from those managing the non-fault accident claim having little or no incentive to keep costs down.’

The CMA will now consult on these measures before publishing the final decision of its independent group of members in September 2014.

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Natalie Middleton

Natalie has worked as a fleet journalist for 16 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day. As Business Editor, Natalie ensures the group websites and newsletters are updated with the latest news.