European Commission right to look under bonnet of motor insurers

Few tears will have been shed among the public at news that Insurance Ireland and some motor insurance providers here were raided yesterday by the European Commission.

“The commission has concerns that the companies involved may have engaged in anti-competitive practices in breach of EU antitrust rules that prohibit cartels and restrictive business practices and/or abuse of a dominant market position,” the commission said in a strongly-worded statement.

The commission officials were accompanied by their counterparts from the Competition and Consumer Protection Commission (CCPC) here, which happens to be carrying out its own investigation into motor insurers signalling upcoming increases in premiums.

The raids are thought to have been on foot of a complaint or series of complaints from new entrants to the market. Other than Insurance Ireland, we can’t be sure which other parties were visited by the commission.

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Databases

In relation to Insurance Ireland, two issues are thought to be in play, both involving industry databases.

The first is called Insurance Link, which allows members of Insurance Ireland and large entities that insure themselves – such as CIÉ, and Dublin and Cork city councils – access to the claims history of individuals seeking to take out a new policy with a fresh provider.

This is essentially a claims database, whereby insurers can check is someone has had claims in the past. It was set up in 1987, and is open to members of Insurance Ireland, who feed information into the hub, which is then managed by an external software company.

Industry sources say the level of claims details available to insurers via this database is limited, and that they were forced to tighten up governance of it following a recommendation in 2010 by the Data Protection Commissioner.

The other database, Integrated Information Data Service, is operated out of Shannon by the Department of Transport and holds information on penalty points.

Insurance Ireland doesn’t have exclusive access to this information but it does operate a link for its members to access this data to assist them when pricing policies. This link is exclusively for Insurance Ireland’s members.

Last year, Zenith Insurance, the largest Gibraltar-based motor insurer in Ireland, stopped offering car coverage in this country. One of the reasons cited for its exit was a lack of engagement by Irish industry bodies, which it said had created a market disadvantage.

You might wonder why these unnamed complainants don’t simply join Insurance Ireland and guarantee themselves access to the databases. By all accounts, Insurance Ireland has never refused an application for membership.

But not everyone wants to be part of an industry club. If Michael O’Leary were running an insurance business, he’d most probably give Insurance Ireland the two fingers and paddle his own canoe as an industry disrupter.

Of course, this raid by the EU might be rendered moot if a Government proposal to set up a national claims database next year comes to fruition. This would allow insurance companies to share details of motor claims and was one of 33 recommendations by from an interdepartmental group set up by Fine Gael's Eoghan Murphy during his time as a minister of State in the Department of Finance.

This purpose of this group was to advance proposals that might help to bring down the cost of motor premiums.

Disruption

Insurance is ripe for disruption. I’ve got the builders in for some renovations on my home. This has meant decamping to an apartment for a number of months.

My home insurance policy with Allianz was due to run until November and when I informed them of the renovation, they reduced the policy to just cover fire risk. This entitled me to a whopping refund of €15.

When I inquired about contents insurance for the apartment, I was told that it would cost me an extra €11 a month. These are the same contents that I’d already insured until November in the house. But because I moved them to another location, I have to take out a new policy. I was offered another €20 refund on my original policy after making a fuss. That followed a near 11-minute wait to get through on the phone to the Allianz call centre.

Having been a customer of Allianz’s for years without ever lodging a claim, I would have expected better service. It will be a familiar tale to many readers.

Motor premiums have rocketed here in the past few years, even for those with a squeaky-clean driving record, an unblemished claims history and a regularly-serviced modern car.

Insurers shrug and blame the claims culture, generous court awards, ambulance-chasing lawyers, uninsured drivers, shortcomings in regulation and more besides.

They are right in some of what they say but they rarely, if ever, take any blame for the massive losses that they have collectively racked up in recent years from badly running their own businesses.

Given what has gone on in this market in recent years, the CCPC and European Commission are right to examine what’s going on under the bonnet of the Irish motor insurance industry.

@CiaranHancock1