The insurance industry is being investigated for breaching competition law after several companies warned of a hike in premiums for car cover.
The Competition and Consumer Protection Commission is looking at major motor insurance companies and says that if necessary it will take action to stop anti-competitive price rises.
Central Statistics Office figures showed that despite a period of low inflation, car insurance premiums rose by 38.3 per cent in a year, meaning a policy that cost €500 last year is likely to cost €690 now.
Aviva and the RSA, two of the country’s largest insurers, said last month that more expensive car insurance premiums were on the way this year. Both blamed the rising cost of claims.
Isolde Goggin, the chair of the CCPC, said that statements warning about price increases had raised suspicion of a breach of competition law. The commission is now issuing summonses as well as requests for more information from major motor insurance providers. It did not state which companies were being contacted.
“Markets work best where businesses vigorously and independently compete against each other for customers. Statements signalling future pricing predictions or intentions may result in a degree of unspoken co-ordination, which may breach competition law,” Ms Goggin said.
“Statements by senior industry players have raised serious suspicion as to whether there is a link between these messages and subsequent price increases. The evidence collected through both the witness summonses and the information requests will assist us in establishing whether there has been a breach of competition law.”
Ms Goggin said that rises in insurance premiums had had a “significant impact” on drivers.
“We continue to closely monitor developments and will, if necessary, take action to stop specific anti-competitive practices in the motor insurance sector,” Ms Goggin said.
She added that her organisation was actively asking members of the public who had evidence of insurers breaking competition law to contact the CCPC.
The Oireachtas finance committee has been holding hearings on the rising price of car insurance for the past week. Pearse Doherty, the Sinn Fein spokesman on finance, said that the CCPC had launched the investigation as a result of the committee’s hearings.
“We have heard this week and last from hauliers, taxi drivers, the legal profession and consumer representatives that the industry has been acting in a fashion akin to a cartel,” Mr Doherty said.
“We have heard an incredible amount of spin from the insurance industry in recent times. It does not stand up to any scrutiny though. They have been fundamentally dishonest in not accepting any responsibility for their actions.”
Brian Hayes, the Fine Gael MEP, welcomed the investigation and said that it was well overdue. “Consumers are angry at this growing problem and rightly so. The relationship between insurers and consumers has been broken in recent years. There needs to be more transparency as to why premiums are being increased,” he said.
“This is a complex issue however, and it should not be a case of laying blame at the feet of insurers. Insurers are facing rising regulatory costs as well as an increase in the level of claims to be paid out.”
Fianna Fail had called for the re-establishment of the Motor Insurance Advisory Board. The agency was set up in 1998 and its recommendations helped to achieve a fall in insurance costs of 40 per cent between 2002 and 2013.
“The insurance companies have tried to suggest it’s a matter of an increase in the cost of settling claims. That hasn’t been borne out by the facts,” Timmy Dooley, the Fianna Fail frontbench spokesman, recently said.
The insurance company FBD said that it welcomed the investigation and that there were “many factors” which influenced car insurance costs.
“One of the main factors is the relatively high cost of bodily injury awards. These awards and associated legal costs are significantly higher than in other EU jurisdictions,” it said.
“We believe Irish awards should be benchmarked against other countries. In addition, we continue to call for increased powers for the Personal Injuries Assessment Board as a key stakeholder in creating an efficient and cost-effective claims process for injured parties.”
A recent briefing note from transport department officials to Shane Ross, the transport minister, said: “Motor insurers are now imposing higher premium rates to return themselves to profitability or to boost profitability after a number of years of insurers competing for market share, with prices driven down.”