The new oversight deal between the Competition and Consumer Protection Commission (CCPC) and the State’s six main motor insurers comes after a long investigation found evidence of anti-competitive “price-signalling” in the industry.
What is the problem?
As Brian McHugh of the CCPC explains: “Businesses are required to set their prices independently. Any form of pricing statements and suspected coordination that could manipulate future pricing raise serious concerns under competition law, as this can impact on competition and ultimately the price consumers pay. The potential for consumer harm is particularly high in the motor insurance market as consumers cannot avoid taking out a policy if they are to drive legally.”
So what did the CCPC do about it?
It has carried out three investigations into the motor insurance trade. This latest one was instigated on foot of public statements made by a number of parties in the sector which appeared to be forecasting with confidence that premiums would rise.
At the time, consumers were reporting increases in their premiums and the CCPC said it was concerned that these statements could be considered price-signalling. Along with other communications about pricing it launched an investigation to see if these were a breach of competition law.
And the outcome of that investigation?
The CCPC issued preliminary findings to seven parties in September 2020, alleging that these organisations had engaged in anti-competitive cooperation over a 21-month period during 2015 and 2016. All the parties denied that they were in breach of competition law. However, as Mr McHugh explained: “The CCPC did not accept that adequate compliance measures were in place in these businesses, as robust compliance programmes would have identified and flagged the behaviours of concern that were under investigation.
“Following constructive engagement with the CCPC, six parties have agreed to implement a number of compliance reforms across their companies to prevent breaches of competition law and which will support whistle-blowers who may come forward.”
What does the deal mean?
Six of the motor insurers involved - AIG, Allianz, Axa, Aviva, FBD and broker AA Ireland- have committed to making legally binding investments into their internal controls and to prove to independent experts that they are not manipulating the price of motor insurance cover.
Failure to comply with the deal would prompt legal action, the CCPC warned. It is also due to get greater powers if new competition legislation is enacted later this year.
So will this deal apply to all insurers?
No, just the six big names who signed up to the deal with the CCPC. Brokers Ireland, the representative body for the 1,200 or so insurance brokers in the State, is not part of the deal. It claims the CCPC never proved anti-competitive behaviour on the part of its members.
So is this the end of the CCPC investigations into motor insurance?
The CCPC is clear that this deal is not the end of the matter. While this particular investigation may have come to an end, the CCPC said it is in no way giving the motor insurance industry a clean bill of health. “In this context, the CCPC has written to the Central Bank to outline broader cultural concerns in the industry which have come to light during the course of the investigation.”
It is in no way giving the motor insurance industry a clean bill of health
Ultimately, will this mean cheaper car insurance?
That’s the thousand euro question for many motorists. Better competition should lead to lower prices – that’s the theory at least. Last month the motor insurance sector faced calls to cut premiums on the back of a dramatic reduction in both the cost of claims and the number of cases. In its annual report for 2020, the Personal Injuries Assessment Board (PIAB) said the number of claims was down 16%, from around 31,000 in 2019 to 26,000 last year. The cost of claims has also been reducing for insurers, according to the Central Bank’s data.
The pandemic clearly had an impact on these figures. Some insurers gave customers small rebates to reflect the fact that they had been off the road during lockdown, but others stubbornly refused to move.
With the number of claims reducing and the cost of personal injury awards being set lower by the new judicial guidelines, insurance costs should begin to lower on a consistent basis. Data from the Central Statistics Office shows that motor insurance costs fell by 6 per cent in the year to the end of June.
Whether this deal between the CCPC and the six big insurers will speed up that drop in premiums remains to be seen, but it adds renewed focus on the sector and closer scrutiny of its pricing policies and activities.