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Six insurance companies and two IT software and service providers have agreed to change the way price information for motor insurance is shared following concerns that previous practices were violating competition laws.

The Office of Fair Trading (OFT) said that the insurers shared price details about future motor insurance price intentions with brokers who in turn used a software company, SSP Ltd, to share the data on an information exchange service. Insurers could use the information exchange, provided by Experian, to check their prices against competitors' and meant they had the potential to use the software to "prevent, restrict or distort competition" through coordinated price setting agreements, the OFT said.

"The formal commitments address these concerns by ensuring that the companies will exchange pricing information through the analysis tool only if that information meets certain principles agreed with the OFT," the competition regulator said in a statement.

"These principles require the information, if less than six months old, to be anonymised, aggregated across at least five insurers and already 'live' in broker-sold policies," it said.

Under the UK's Competition Act companies are generally prohibited from establishing agreements with other UK trading firms that "have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom".

The OFT said that the agreement would stop the potential for price fixing whilst ensuring "healthy" competition in the market.

"The exchange of future pricing data between competitors has the potential to dampen competition, preventing customers from getting the best value," said Clive Maxwell, executive director at the OFT.

"We have been able to address our concerns by accepting commitments that reflect the specific features of this market. These limit data sharing while ensuring a certain level of information remains available to potential new competitors, in particular smaller firms, to encourage entry into and healthy competition in the market," Maxwell said.

Later this month the OFT is expected to publish its report into the rising cost of motor insurance premiums. In September the OFT said it wanted to find out whether motor insurance premiums had risen on average by more than 40 per cent and whether any the reasons for the reported increase threw up any consumer or competition issues that need to be addressed.

The regulator asked insurers and other market participants for their views on the role played by price comparison websites, the provision of credit hire replacement vehicles, insurers' use of panels of approved repairers and "add-on" products sold in addition to standard insurance cover.

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