How does cheaper car insurance come about? – The Irish Instances

Leading motor insurers have agreed with the Competition and Consumer Protection Commission (CCPC) to improve compliance with competition law after a long investigation. Here's what it means and how it happened.

What have car insurers done?

Motor insurers AIG, Allianz, Axa, Aviva, FBD and broker AA Ireland have agreed with government regulators to improve their compliance with competition rules following an investigation.

Will this lower my car insurance costs?

Ultimately it should, but no one can say that if you renew it, your premium will drop by 10 percent. Instead, it is likely that the move will improve competition between the companies that make up 70 percent of the market, forcing them to lower prices over time.

Who studied the companies?

The Competition and Consumer Protection Commission, the state authority responsible for monitoring and enforcing competition law.

What was investigated?

Allegations of an illegal practice called "price signaling". This is where competing companies tell each other in advance that they are increasing the fees, which allows further price increases in their industry and drives up costs for all customers.

What did it start?

Detailed public statements by insurers up to 2015 and 2016 on future price increases.

Surely many companies are announcing price increases?

Yes, but on standard products and services with fixed tariffs. Each individual insurance is – in theory anyway – different, as the risks vary from customer to customer, so that uniform increases should not necessarily apply in this business.

What did the CCPC find?

In September 2020, it submitted preliminary findings to the companies alleging that they had each been anti-competitive for 21 months.

What did the companies say?

They denied this and said they had put in place their own compliance measures, but the CCPC argued that these were inadequate as they failed to identify potentially anti-competitive practices in the first place.

Why did it take so long?

The investigators had to deal with a large number of details, internal documents and other material of the companies involved and question 55 individual witnesses.

So what happens now?

The six companies have agreed to reform their compliance practices in order to prevent future violations of competition law. Independent experts will monitor this. Each organization's commitment is legally binding, which means they could face legal proceedings if they fail to honor any part of them.

What did you agree on?

Provide an internal system to detect and report likely violations of competition law, protect any whistleblower who might come forward, appoint compliance officers to report to their board members, staff training and annual filings with the CCPC to show that everyone continues to comply with the agreement.

Have everyone signed up?

No. Brokers Ireland, which was created in 2017 from the merger of the Irish Brokers ’Association (IBA) and the Professional Insurance Brokers’ Association, does not.

Why not?

Its board chairman, Diarmuid Kelly, says the commission has never proven that the IBA, one of its predecessor organizations, engaged in anti-competitive behavior. He claims that the CCPC did not respond to the detailed rebuttal of the association's preliminary results last November.

What did the CCPC say about this?

Brian McHugh, Commissioner for Competition Law Enforcement, argued that Brokers Ireland had an obligation to deal with IBA behavior, which raised concerns. Had the organization signed an agreement, it would have shown its commitment to future compliance.

Is that for insurers?

No. The CCPC has written to the central bank highlighting its industry concerns. The commission says it has invested a lot of time and resources looking into the industry and its business practices. Although this investigation is complete, the commission says it "in no way gives the industry a clean health certificate".

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