Transcript Staff briefing - 2015 International Competition Network

Across Platform Parity Agreements (APPAs)
CMA Private Motor Insurance
Market Investigation
ICN Annual Conference, Friday 1 May 2015
Special Project session: Online Across Platform Parity Agreements
Room: Castlereagh 2
Alex Chisholm
Chief Executive
1
APPAs and the CMA
● CMA has considered (direct and indirect) competitive impact of APPAs
(or “retail MFNs”) in various contexts…
Antitrust Enforcement
APPA as core competition
concern
APPAs
Antitrust enforcement
APPA linked with other
restrictions on competition
Market investigation
APPAs as ‘feature’ of market
● PMI Market investigation: market-wide assessment of whether
feature(s) of private motor insurance market were having adverse effect
on competition
2
PCWs as ‘friends’ of competition?
“Aggregators cost the UK insurance industry
£1 billion in unnecessary price competition, last year ”
(Towers Watson, insurance consultancy:
'Why aren't we making money…, December 2010‘)
3
PCWs as ‘friends’ of competition:
positive impacts?
● Motor insurance used to be a ‘problem’ market
-
Inactive customers
-
High prices charged on renewals
● PCWs have incentive to advertise heavily, agitate inactive
customers and lead to big price reductions
-
64% of motor insurance buyers using them in UK
-
£200+ average savings for first time users
● Should facilitate entry by new insurers
-
No need to sink £s into expensive direct sales channel
4
PCWs as ‘enemies’ of competition?
Narrow
Most Favoured Nation
clause
Wide
Most Favoured Nation
clause
5
PCWs as ‘enemies’ of competition:
negative impacts?
● Single homing can give a PCW unilateral market power
● Some PCWs able to use that to negotiate wide MFNs, so
insulating them from competition from other channels
● Commission-rate business model leads to a price-ratchet:
-
a PCW with an MFN could eventually make all prices monopoly prices
-
Appearance of competition, without benefits from genuine competitive
interplay?
6
Intervention by the CMA
● Prohibited MFNs that eliminate competition between rival PCWs
(“wide” MFNs)
-
(Permitted “narrow”, or “vertical” MFNs that relate prices between
supplier and intermediary; concern to protect PCW investment)
● Prohibited “equivalent behaviours”
● Impact:
-
Objective that PCWs compete to attract customers to platform based on
price
7
Back to the discussion…
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