Competition and competition law is vital in any business.
It is very important that consumers and farmers have confidence that insurance companies are competing aggressively against each other, especially in the motor insurance market.
Following an investigation by the Competition and Consumer Protection Commission (CCPC), five motor insurance companies and broker, AA Ireland Limited, have signed legally binding agreements to reform their internal competition law compliance programmes.
The investigation involved a five-year probe by the CCPC into suspected price signalling (an anti-competitive practice where businesses make their competitors aware that they intend to hike prices) by organisations operating in the motor insurance market.
This meant insurers and brokers could tip each other off to forthcoming premium rises so that rivals could move together rather than compete openly for business.
This practice effectively stops consumers moving to a competitor and led to price increases across the market.
The five insurance companies that have signed up to the legal commitments following the investigation are AIG Europe SA, Alliance PLC, AXA Insurance DAC, Aviva Insurance Ireland DAC and FBD Insurance PLC.
The CCPC will be able to take legal proceedings to enforce the agreements if any of the parties fail to comply.
Brokers Ireland (BI), which was also included in the investigation, refused to sign up to the agreements and said its members had not broken any rules or engaged in conduct that amounted to a breach of competition law.
It said the CCPC did not prove that the Irish Brokers Association (IBA) - BI’s predecessor - contravened competition law and strongly rebutted all the CCPC findings.
BI also claimed the CCPC attempted to impose a one-size-fits-all legal compliance regime, designed for large insurance companies, and that it would have been wholly unworkable for it.
The CCPC said the legally binding agreements in no way give the industry a clean bill of health and it has written to the Central Bank of Ireland outlining its concerns about the broader culture of the insurance industry and the "repeated interventions that have been needed to address issues in the sector".
The direct appeal to another regulator shows the limited powers of the CCPC under existing law to fully investigate and punish any anti-competitive misconduct.
However, under the new forthcoming legislation - the Competition (Amendment) Bill - the CCPC is set to gain new powers allowing it to wiretap phones and intercept electronic communications to disrupt cartels.
This bill is a priority for Government this year, as part of its overall commitment to reform the insurance sector.
The new law will significantly strengthen the CCPC’s powers, giving it the ability to administer fines for breaches of competition law.
The CCPC said insurance businesses are required to set their prices independently and any form of price statements and suspected co-ordination that could manipulate future pricing raises serious concerns under competition law.
This can ultimately affect the price consumers pay and the potential for consumer harm is high, as consumers need to take out motor insurance policies in order to drive legally.
The CCPC confirmed that since it opened its probe in 2016, following announcements around large increases in premiums, these announcements have ceased.
The sooner this new legislation comes into law, the better for consumers and farmers who need insurance on an annual basis.