How will cheaper car insurance come about?

Leading motor insurers have agreed with the Competition and Consumer Protection Commission (CCPC) to boost compliance with competition law following a long investigation. Here's what it means and how it happened.

What have motor insurers done?

Motor insurers AIG, Allianz, Axa, Aviva, FBD and broker AA Ireland have agreed with State regulators to improve their compliance with competition rules following an investigation.

Will this cut my motor insurance costs?

Ultimately it should, but no one can say your premium will fall 10 per cent when you renew cover. Instead the likelihood is that the move will improve competition between the companies, which make up 70 per cent of the market, forcing them to cut prices over time.

Who investigated the companies?

The Competition and Consumer Protection Commission, the State agency responsible for supervising and enforcing competition law.

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What did it investigate?

Allegations of an illegal practice called “price signalling”. This is where rival companies let each other know in advance that they are increasing charges, allowing further price hikes across their industry, pushing up costs for all customers.

What started it?

Detailed public statements from insurers through 2015 and 2016 about future price increases.

Surely lots of businesses announce price increases?

Yes, but on standard products and services with set rates. Each individual insurance policy is different – theoretically anyway – as the risks vary between customers, so uniform hikes should not necessarily apply in this business.

What did the CCPC find?

In September 2020 it issued preliminary findings to the companies alleging that each had engaged in anti-competitive co-operation over 21 months.

What did the companies say?

They denied this, saying they had their own compliance measures in place, but the CCPC argued that these were inadequate as they failed to flag potentially anti-competitive practices in the first place.

Why did this take so long?

Investigators had to deal with a huge amount of detail, internal documents and other material from the businesses involved, as well as interviewing 55 individual witnesses.

So what happens now?

The six companies have agreed to reform their compliance practices to help prevent any breaches of competition law in the future. Independent experts will monitor this. Each organisation’s pledge is legally binding, meaning they could face court action if they fail to honour any part of it.

What did they agree to do?

Provide an internal system to detect and report likely breaches of competition law, protection for any whistle-blower who might come forward, appoint compliance officers who report to their boards, staff training and yearly submissions to the CCPC showing each continues to honour the deal.

Did everyone sign up?

No. Brokers Ireland, formed in 2017 from the merger of the Irish Brokers’ Association (IBA) and Professional Insurance Brokers’ Association, has not.

Why not?

Its chief executive, Diarmuid Kelly, says the commission never proved that the IBA, one of its predecessor organisations, engaged in anti-competitive behaviour. He maintains that the CCPC has not responded to the association's detailed rebuttal of its preliminary findings, issued in November last year.

What has the CCPC said about this?

Brian McHugh, the commission member responsible for competition enforcement, argued that Brokers Ireland had an obligation to address the IBA’s conduct, which gave rise to concerns. Had the organisation signed an agreement, that would have demonstrated its commitment to future compliance.

Is this it for insurers?

No. The CCPC has written to the Central Bank highlighting concerns about the industry. The commission says it has invested considerable time and resources investigating the industry and its business practices. While this inquiry has ended the commission says it is "in no way giving the industry a clean bill of health".