THE COMPETITION AND Consumer Protection Commission (CCPC) has secured legally binding commitments from six car insurance companies that were under investigation for anti-competitive practices. 

AIG Europe S.A., Allianz PLC, AXA Insurance DAC, Aviva Insurance Ireland DAC, FBD Insurance PLC and AA Ireland Limited have all agreed to reform their internal competition law compliance programmes following the five-year probe into allegations of ‘price-signalling’.

This occurs when businesses make their competitors aware that they intend to increase prices, in turn causing further price increases across the sector.

Each of the six firms will be required to appoint a competition law compliance officer and make an annual submission to the CCPC demonstrating conformity with the new regime.

A seventh entity, trade association Brokers Ireland, declined to enter into legally binding commitments.

The CCPC’s announcement comes one month after the Central Bank of Ireland published its final report into another anti-competitive pricing practice, differential pricing, which it said was widespread across the car and motor insurance industry.

On foot of a three-year review of the sector, the regulator recommended that the Government ban a particular variety of differential pricing called ‘price walking’ — the practice of charging customers higher premiums the longer they’re with an insurer.

Price-signalling

The CCPC began its investigation into suspected price-signalling within the car insurance sector in 2016.

Preliminarily findings published last year suggested that the organisations had been “engaged in anti-competitive cooperation over a 21-month period during 2015 and 2016″.

In a statement, the CCPC said it had concerns that public statements made by “a number of parties in the sector” appeared to forecast “with confidence” that premiums would rise in the future.

When the investigation was launched in 2016, “Consumers were reporting increases in their premiums and the CCPC was concerned that these statements could be considered price-signalling and, along with other communications about pricing, a breach of competition law.”

Speaking today, Member of the Commission with responsibility for Competition Enforcement and Mergers Brian McHugh said, “Whilst this particular investigation may have come to an end, the CCPC is in no way giving the industry a clean bill of health.

Upon closing the investigation, the CCPC has now written to the Central Bank of Ireland outlining its concerns about the culture of the industry, he said.

McHugh added that 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,” he said.

“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.”

McHugh was critical of Brokers Ireland’s refusal to enter into legally binding commitments, saying the decision “arguably calls into question the organisational attitude towards compliance.”

Brokers Ireland — which includes over 1,200 insurance and financial brokers among its members and which partners with a number of major insurers — has “wholly denied” the allegations of anti-competitive practices and welcomed the closure of the investigation. 

Chief Executive of Brokers Ireland Diarmuid Kelly said his organisation “rejects any suggestion that the IBA ever engaged in conduct that amounted to a breach of competition law.”

“The nature of the CCPC processes raises concerns, especially where, as here, preliminary findings were issued and the CCPC didn’t respond to detailed submissions on these findings” he said.

He said no settlement agreement was reached with the CCPC because they did not prove that the IBA contravened competition law and because they “tried to impose a one-size-fits-all legal compliance regime designed for large insurance companies which would have been wholly unworkable for Brokers Ireland”. 

He added that there was no necessity for the CCPC to try to impose a compliance regime on Brokers Ireland “since the culture of compliance that the CCPC sought to achieve with its legal regime was already in place in Brokers Ireland”. 

No breaches

During the course of the investigation, a considerable volume of information which included the content of interviews carried out under summons and email correspondence between industry participants were examined.

The CCPC also continued to monitor industry commentary on private motor insurance premiums and observed no further statements of concern.

CEO of Insurance Ireland Moyagh Murdoch said its members had “constructively engaged with the CCPC throughout this process, and no breaches of competition law were found.”

“The implementation of compliance reforms by the members concerned demonstrates a commitment to competition law compliance, which, as noted by the CCPC, supports markets to operate in a fair and competitive way and ultimately for the benefit of consumers,” she said. 

Additional reporting by Ian Curran