Six motor insurance companies have signed legally binding agreements to reform their internal competition law compliance programmes, following an investigation by the Competition and Consumer Protection Commission.
However, Brokers Ireland, which was also the subject of the probe, has declined to sign up to the agreements.
It has strongly rejected it ever engaged in conduct that amounted to a breach of competition law.
The development brings to an end a five-year long investigation by the CCPC into suspected “price-signalling” by organisations operating in the insurance market – an anti-competitive practice where businesses make their competitors aware that they intend hiking prices.
The CCPC said the agreements in no way give the industry a “clean bill of health” and it has written to the Central Bank outlining its concerns about the broader culture of the industry and the “repeated interventions that have been needed to address issues in the sector.”
The six firms that have signed up to the legal commitments are AIG Europe SA, Allianz PLC, AXA Insurance DAC, Aviva Insurance Ireland DAC, FBD Insurance PLC and AA Ireland Limited.
“Businesses are required to set their prices independently,” said Brian McHugh, CCPC member.
“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.”
The practice of price signalling can take place in public through announcements or comments on prices, or in private through direct contacts between companies.
Competition experts believe that if a particular firm knows that their competitor is raising prices then they may be encouraged to follow suit, because their customers are less likely to move to their competitor.
This can lead to increases in prices across the market.
Brian McHugh of the Competition and Consumer Protection Commission said its investigation into suspected price signalling has brought about a positive outcome.
“It is very important from a consumer point of view. Competition is very important in the industry. We are always telling consumers to shop around and it is important they have the confidence that the companies are competing aggressively against each other. So we view this as a positive outcome for the investigation,” he stated.
He also said they are disappointed that Brokers Ireland has declined to sign up to the agreement, but added that overall there is a positive signal that the industry does want change.
The Commission will keep monitoring the market and it will open an investigation if it finds issues that cause concern, he said.
“We don’t have the power to make a finding in relation to a breach of competition law. We are hoping we will get additional powers and it is something government is working on and we are anticipating we will see something this year in terms of legislation,” he added.
The CCPC said it launched the price-signalling probe in 2016, at the same time as prices in the market were rising, after public statements were made by a number of people in the sector that seemed to forecast with confidence that premiums would rise.
The commission was concerned that these statements, coupled with other communications about pricing, could amount to a breach of competition law.
Over the five year long investigation, the CCPC examined large volumes of information and correspondence and carried out interviews.
It also monitored industry commentary and claims it observed no further statements of concern.
Last September, it did issue preliminary findings to the seven companies and organisations alleging that they had engaged in anti-competitive cooperation over a 21-month period between 2015 and 2016.
These allegations were denied by the firms concerned and according to the CCPC they backed up their denials by pointing to their compliance programmes and measures.
“However, the existence of a compliance program is of little value unless, when tested, a business and all of its employees can demonstrate that compliance is an integral part of the culture and working practices of the company,” said Mr McHugh in a statement.
“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.”
Since then, the six insurers have signed legal agreements to implement a range of reforms in the compliance procedures, including mechanisms to enable employee whistle blowers to speak out and independent expert oversight.
The CCPC will be able to take legal proceedings to enforce the agreements if any of the parties fail to comply.
However, the representative body for insurance and financial brokers, Brokers Ireland, has declined to sign up to the deal.
This is despite the CCPC finding conduct and behaviour by the Irish Brokers Association, one of the two associations that amalgamated to form Brokers Ireland, which raised serious competition concerns.
“It is the CCPC’s view that Brokers Ireland, a representative body for insurance brokers, had a responsibility to fully address the conduct of its predecessor organisation, the Irish Brokers Association, which raised competition law concerns,” Mr McHugh said.
“By signing an equivalent agreement to that of the other six parties, Brokers Ireland would have, in the CCPC’s view demonstrated its commitment to compliance in the future.”
Brokers Ireland said it wholly denied the CCPC allegations and rejected 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,” said Diarmuid Kelly, chief executive of Brokers Ireland.
“Parties with legitimate points to make are forced to consider unworkable programmes, without the CCPC dealing with the points made in rebuttal.”
He added that no settlement agreement was reached because the CCPC did not prove the IBA contravened competition law and it had also strongly rebutted the commission’s allegations.
Brokers Ireland also claimed the CCPC attempted to impose a one-size fits all legal compliance regime designed for large insurance companies that would have been wholly unworkable for it.
Furthermore it claimed it has a strong compliance regime already in place.
In a statement, Insurance Ireland said it noted the conclusion of the CCPC’s investigation and that in reaching its conclusion, the CCPC has not made findings that breaches of competition law have occurred.
“Members of Insurance Ireland have constructively engaged with the CCPC throughout this process, and no breaches of competition law were found,” said Moyagh Murdock, CEO of Insurance Ireland.
“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.
This is the third investigation carried out by the CCPC into the Irish insurance sector.
In June, European Commission competition regulators told Insurance Ireland that they have formed the preliminary view that it breached competition rules in the motor market, following a two-year long investigation.