Millions of customers could be paying higher premiums after a provisional investigation by the competition watchdog found Comparethemarket used clauses in contracts preventing home insurers quoting lower prices on rival sites.

According to the Competition and Markets Authority (CMA), these ‘most favoured nation’ clauses could mean customers are missing out on better home insurance deals as insurers are unable to offer cheaper prices elsewhere.

It also means home insurance companies are more likely to pay higher commission rates to comparison sites with the extra costs potentially being passed on to customers.

The CMA has issued Comparethemarket with a ‘statement of objections’, explaining its view of why the contracts are breaking competition law. The comparison site will now need to respond before the CMA reaches a final decision on the matter.

CMA chief executive, Andrea Coscelli, said: “Over 20 million UK households have home insurance and more than 60% of new policies are found on price comparison sites. Therefore it’s crucial these companies are able to offer customers their best possible deals.

“Our investigation has provisionally found that Comparethemarket has broken the law by preventing home insurers from offering lower prices elsewhere. This could result in people paying higher premiums than they need to.”

A spokesperson of BGL Group, which own Comparethemarket, said: “We are disappointed by the CMA’s provisional findings. We will carefully review the evidence once we have access to it, and look forward to working with the CMA over the coming months to ensure a satisfactory outcome.”