The UK Competition and Markets Authority (CMA) has proposed the chnages it seeks to make in the country's private motor insurance (PMI) market, as part of its strategy to boost competition and slash motor insurance premiums.
By initiating an array of measures, competition watchdog wants to clamping down on premiums for all drivers by proposing to impose a cap on replacement vehicle costs afer motor accidents.
The CMA said that the cap on charges passed to the insurer of the driver who is at-fault in an accident for the cost of providing a replacement vehicle to the non-fault driver, would more closely reflect the costs incurred and remove significant inefficiencies.
Earlier, the watchdog found that the complex chain of claim costs following an accident together increases premiums by nearly £200m annually.
The regulatory body has also proposed that competition in the market should be boosted by banning price parity agreements between comparison websites and insurers.
CMA argued these agreements prevents insurers from making their products available to consumers elsewhere more cheaply.
In addition, the agency has weighed the necessity of providing consumers better information about their rights following a motor accident as well as about the costs and benefits of taking out protection against their no claims bonus.
It has recommended that the Financial Conduct Authority (FCA) must check how insurers inform consumers about other add-on products related to private motor insurance.
CMA deputy panel chairman and private motor insurance investigation group chairman Alasdair Smith said: "There are over 25 million privately registered cars in the UK and we think these changes will benefit motorists who are currently paying higher premiums as a result of the problems we’ve found.
"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."
The CMA will consult on the plans before publishing a final decision in September this year.