Govt vows to make insurance market competitive
The Government vowed today to remove any barriers to competition in the insurance industry in a bid to slash prices.
Enterprise Minister Micheal Martin said the 47 recommendations from the Competition Authority to make the four-billion euro non-life insurance industry more competitive would be put in place.
“From a competition point of view, I am determined to ensure that the insurance business in Ireland operates in an environment that is conducive to encouraging new players into the market,” Mr Martin said.
The authority’s lengthy two-year study branded the competition in the sector “sluggish” and found the price of insurance was being kept artificially high, with an average household paying out €3,000 on insurance a year.
The report stated competition among insurance companies was weak because of barriers placed on entry into the market and mobility.
“I will be arranging for the recommendations in this report to be urgently discussed with those departments and agencies responsible for implementing them,” Mr Martin said.
The report found that strengthening competition in the insurance sector is essential if the Government’s reform package is to work.
The examination by the competition watchdogs of the non-life insurance sector covered the motor area, employers liability and public liability insurance.
“Profit levels for insurance companies in Ireland are at historically high levels but unlike a competitive market, new or existing companies are not responding quickly to the profitable opportunities,” John Fingleton, chair of the authority, said.
“Many motorists, businesses and voluntary groups do not have enough information to help them search for better insurance quotes and when they do search they find limited choice.”
The report found that an enormous hike in commissions had pointed towards serious competition concerns among the middle link, brokers, in the market.
However, John Hogan of the Professional Insurance Brokers Association said: “This claim is totally exaggerated and outdated. As the economy grew and premium levels rose after 9/11, commissions obviously rose. Now that premium levels have dropped, commissions have also dropped.”
The authority found that if more competition was introduced and resulted in a 5% price reduction, it would mean gains of €200m annually for consumers, or more than €150 for each household.
The study showed the insurance companies have experienced significant external cost reductions over the past two years but consumers are still overpaying.
Mr Fingleton said the cost of moving from one insurance company to another should be reduced.
The authority recommended that industry statistics should be centrally gathered and published each year, it touted transparency in legal claims and it looked for an insurance compensation fund to cover all Irish at risk.
The recommendations to open the high cost insurance market for motorists included a certified claims history and issuing renewal notices directly to the customer.
The authority said that car insurance was a huge payment each month for some consumers. However, it said that every consumer indirectly pays the cost of liability insurance each day, as each grocery bill includes a contribution towards that retailer’s insurance.s
