Analysis: Potential insurers cannot get the information they need to assess the market, writes Barry O'Halloran
Information, or the lack of it, is very much at the heart of the Competition Authority's findings on the Irish insurance market.
The authority believes the main barrier to entry into the market is a lack of access to data that will allow potential competitors to the existing players to calculate the risks and costs associated with doing business in this market.
Launching its final report into the sector yesterday, the authority's chairman, John Fingleton, pointed out that no insurer is going to go into business here without first knowing what level of claims and costs they are likely to encounter. And currently they cannot get that information.
With no new entrants, competition in the market will continue to be what Mr Fingleton calls "sluggish" and consumers and businesses will suffer by paying too much for insurance cover.
The lack of competition has created a situation where there are dominant players in many sections of the industry. For example, 90 per cent of the young female drivers' market is tied up by two companies. In situations like this, consumers have nowhere to go, and the insurers can charge what they like.
So the authority believes key information should be made available so that potential entrants and existing players wishing to expand into new areas can form a true picture of the market, and hopefully begin to offer consumers new options.
The industry itself does not believe that lack of information is the problem. The Irish Insurance Federation (IIF) yesterday said the market's small size and recent volatility have put off new entrants. Groups like the IIF and the various bodies that represent brokers have told Oireachtas committees and the authority that poor profitability was the main barrier to entry. However, the report states that this in itself is not necessarily a deterrent.
Nor is it relevant any more, the report points out, that the sector is highly profitable. The combined net operating profits of both the motor and liability insurance sectors hit €500 million in 2003. Between 2000 and 2003, motor premiums increased by 20 per cent and employer and public liability charges grew by 120 per cent. The overall business is valued at €4 billion.
The report homes in on the lack of information and transparency. It points out that the data on reserves and liabilities that the industry is obliged publish in the Department of Enterprise, Trade and Employment's Blue Book is generally a year old. At the same time, it says, the IIF makes only limited data available to non-members, including potential market entrants.
Changing this means implementing the report's 47 recommendations. But who is going to do this? Mr Fingleton points out that many of them are in the gift of the Irish Financial Services Regulatory Authority (Ifsra). Legislative change may be needed in a small number of cases.
The Minister for Enterprise, Trade and Employment, Micheál Martin, said yesterday he would be arranging urgently to discuss the recommendations with the relevant Government departments and agencies.
The Alliance for Insurance Reform (AIR) said that historically the industry has not been open. Director Barry English said: "AIR's concern is that without Government enforceability of the Competition Authority's recommendations, the insurance sector will not co-operate."