1. 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

2. APPAs and the CMA ●CMA has considered (direct and indirect) competitive impact of APPAs (or “retail MFNs”) in various contexts… 2 Market investigation APPAs as ‘feature’ of market Antitrust enforcement APPA linked with other restrictions on competition Antitrust Enforcement APPA as core competition concern ●PMI Market investigation: market-wide assessment of whether feature(s) of private motor insurance market were having adverse effect on competition APPAs

3. PCWs as ‘friends’ of competition? 3 “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‘)

4. 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

5. PCWs as ‘enemies’ of competition? 5 Wide Most Favoured Nation clause Narrow Most Favoured Nation clause

6. 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

7. 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

8. Back to the discussion… 8