Motor insurance and the dangers of information exchange

Updated February 2011

Several leading motor insurers (Ageas (formerly Fortis), Aviva, AXA, Liverpool Victoria, RBS Insurance, RSA and Zurich), as well as two service providers (Experian and SSP), have promised to limit information exchanges in the wake of a year long Office of Fair Trading (OFT) investigation.

The investigation highlights the dangers of information sharing (whether direct or indirect) between any competing business, including those operating in the insurance (or automotive) sectors.

In the present case, each of the insurers used Experian's specialist market analysis tool called 'Whatif? Private Motor'. The tool allowed the insurers to access not only the pricing information they themselves provided to brokers (to enable brokers to quote their products), but also similar current and forward-looking pricing information supplied by other insurers for almost all combinations of risk that each insurer would price for. The OFT was concerned that access to this information could lead to the coordination of prices and other commercial conduct of the participating insurers. The OFT also noted that the information disclosed via Whatif? Private Motor was not genuinely in the public domain - although theoretically accessible by obtaining hundreds of thousands of quotes.

In the present instance, the OFT is preparing to accept commitments from the parties to cease such exchanges. In effect, the parties are promising to implement certain changes to Whatif? Private Motor etc. to ensure each participating insurer cannot access its rivals' data through this tool. Certain information may still be made available, however, it will need to be aggregated and anonymised and based on current polices (rather than future prices).

The case is interesting – not only because it highlights the OFT's concerns over information sharing, but also because it is likely to be resolved through the negotiation and acceptance of binding commitments, rather than large fines. It is worth noting though that the OFT will only consider commitments in certain circumstances; indeed, had the parties been indulging in a secret cartel to exchange such information – as opposed to subscribing to a widely publicised Experian service – the OFT is likely to have taken a much harder line.

It follows that any company that has contact with its competitors, whether direct or through a third party forum or product, should think very carefully about such contact and whether it could lead to suspicions of a cartel or allegations surrounding the anti-competitive exchange of sensitive commercial information.

For further information, please contact Miles Trower or your regular TLT adviser.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2011. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

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