A CLAMPDOWN on the £11 billion private motor insurance market has been announced by the competition watchdog which should cut the cost of drivers' premiums.

Measures announced by the Competition and Markets Authority (CMA) include banning agreements between price comparison websites and insurers which stop insurers from making their products available more cheaply elsewhere online.

Currently, some clauses in contracts between websites and motor insurers block insurers from making their products available at a better price somewhere else. This restricts competition and leads to higher premiums generally, the CMA said.

The CMA has also said consumers should get better information about the costs and benefits of taking out protection on their no-claims bonus.

It has also recommended that the Financial Conduct Authority (FCA) looks into how insurers tell customers about other products sold as add-ons to car insurance policies, and considers how consumers could be better informed about their choices.

The competition watchdog said that limited provision of information over add-on products makes it hard for consumers to compare the costs and benefits, with the sale of no-claims bonus protection "giving rise to particular concerns".

As part of its investigation, the CMA looked at the possibility of capping the cost of a courtesy car following an accident, after finding there was often little incentive to keep this cost down due to a divide between who organises the courtesy car and who pays for it.

But it said that, "reluctantly", it cannot see a way of addressing the problem fully.

Often, while it is the insurer of the innocent party in an accident that arranges for a temporary vehicle replacement, it is the insurer of the driver who caused the accident that picks up the tab.

A previous paper published by the CMA in July cast doubt over its ability to impose a cap.

The CMA said today that while this practice causes "inefficiencies", there is "no effective and proportionate remedy" for this and any ways of getting around the problem would require a significant change in the law. This would not be warranted as the problem adds only around £3 a year on average to premiums.

The watchdog is encouraging insurers to consider more readily providing cover for a replacement car when their customer is not at fault in an accident.

Alasdair Smith, chairman of the private motor insurance investigation group and CMA deputy panel chairman, 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.

"There need to be improvements to the way price comparison websites operate.

"They certainly help motorists look for the best deal, and this in turn has led insurers to compete more intensely, but we want to see an end to clauses which restrict an insurer's ability to price its products differently on different online channels. We expect this to lead to greater competition between price comparison websites."

The Office of Fair Trading (OFT) referred the private motor insurance market for a competition investigation in September 2012. The CMA did not consider personal injury claims such as whiplash as part of its investigation as the Government is already clamping down on this area.

The AA said that while the measures unveiled by the CMA could knock around £20 off the cost of a typical policy, around £200 has already been wiped off the average cost of comprehensive cover for someone who shops around since the end of 2011.

According to a British insurance premium index run by the AA, the average "shop around" cost of a comprehensive car insurance policy, bought direct or from price comparison sites, had fallen from £709 in December 2011 to £504 at the end of June this year.

Janet Connor, managing director of AA Insurance, said: "While of course we welcome any measures that help to contain consumer costs and improve transparency, there remains much greater scope to reduce costs by continuing to tackle the tide of insurance fraud.

"For example, attempts to exaggerate or make false whiplash injury claims cost up to £90 per policy. This remains a considerable burden on insurance companies but it was outside the remit of this inquiry."

Peter Plumb, chief executive of comparison website MoneySuperMarket, said: "We welcome this move by the CMA which will help bring car insurance prices down.

"The removal of clauses from some price comparison website contracts, which prevent insurers from offering a cheaper premium through another price comparison website, is good for consumers.

"Unlike some other comparison websites, MoneySuperMarket never uses these clauses."