Insurers face millions of euro in cartel probe fines
Vestager launches major EU probe into motor insurance to check if competition is stifled
Insurance companies in this country could be facing multi-million euro fines from the European Union over claims motor insurers are operating a cartel.
It comes after the European Commission launched a formal probe into claims of a cartel operating here.
The commission has opened a formal competition investigation into industry representative body Insurance Ireland over claims of anti-competitive behaviour.
EU Commissioner Margrethe Vestager recently forced tech giant Apple to pay this State €13bn in back taxes. She is now probing whether the insurance industry here operates a closed shop to deny entry to new entrants and keep premiums high.
It is unprecedented for the powerful EU competition directorate to probe an insurance body such as Insurance Ireland.
The investigation gives hope to policyholders that the insurance crisis will be tackled.
Insurance Ireland insists the probe was against it alone, and the maximum fine that could be imposed would be 10pc of its own turnover.
Legal sources who specialise in competition law agreed the EU Competition Directorate has the power to fine organisations - if it finds against them - 10pc of their worldwide turnover.
But in the case of a membership organisation such as Insurance Ireland, the fine would be based on the turnover of the insurance company members that make up the body.
This could mean the fines, in the event of a finding against Insurance Ireland, could run to millions of euro.
And experts said insurers would find it hard to pass on the cost of a fine to consumers, just after coming under such high-level scrutiny.
Ms Vestager's office is investigating whether restricted access to its Insurance Link database system may restrict competition, in breach of EU rules.
It follows dawn raids on Insurance Ireland and a number of brokers here in July 2017.
InsuranceLink provides the claims history of individuals who are seeking to take out a new policy with a new insurer.
The database is run by Insurance Ireland, the representative body for the industry here. It contains the claims history of all drivers.
Ms Vestager, who is in charge of competition policy, said: "Insurance is essential for all car drivers in Europe.
"We are investigating whether companies wishing to offer their services on the Irish motor insurance market may have been unfairly prevented from accessing a data pool managed by Insurance Ireland for its member companies," she said.
"This could potentially reduce Irish drivers' choice of motor insurance policies at competitive prices."
Zenith Insurance pulled out of the Irish market in 2016 - claiming it could not get access to industry data.
In a statement at the time it cited a "lack of engagement with us by Irish industry bodies, which we believe creates a market disadvantage for us and our partners".
The Gibraltar-based company was selling insurance through a Galway-based broker called Bump.
Insurance Ireland insists InsuranceLink is accessed by Insurance Ireland members and non-members.
"Insurance Ireland understands that the investigation is focused on the InsuranceLink database, which is a secure database that holds claims information as a tool to assist in fraud detection.
"InsuranceLink is accessed by Insurance Ireland members and non-members and has been in operation since 1988," it said.
"Insurance Ireland is co-operating fully with the European Commission in its enquiries and is confident its practices are fully compliant with competition law."
It insisted the probe was against it only.
"The commission's decision does not name any legal entity other than Insurance Ireland. We understand the commission is investigating the conditions of access to the InsuranceLink database operated by Insurance Ireland," it said.
"In the circumstances, were there to be a finding of infringement, the maximum fine that could be imposed would be 10pc of the turnover of Insurance Ireland only."
Peter Boland, of the Alliance for Insurance Reform, said if the commission probe finds against Insurance Ireland, it would be a positive for policyholders.
"We applaud anything that brings more transparency to a notoriously secretive industry.
"It is impossible to diagnose what is causing the crisis because of the lack of data," he said.
Mr Boland called on the EU Commission to conclude its probe quickly.
The Consumers' Association of Ireland said it welcomed the commission's investigation into insurance providers database access rules.
"Consumers must have every competitive opportunity available when it comes to their legally required motor insurance," a spokesperson said.
"If there is a barrier to that then we move to remove it."
Fianna Fáil finance spokesperson Michael McGrath said: "If this investigation finds that Insurance Ireland is acting in an anticompetitive manner and breaking EU rules, the implications could be very serious."
Mr McGrath said it is not acceptable that potential entrants are prevented from entering the Irish market on a level playing field.
"We need more players offering consumers more options and if this were to happen I believe premiums would reduce," he said.
He said the National Claims Information Database is way behind schedule and there is no sign of it being established anytime soon.
"By having data published by the State, we will be ensuring that companies do not have to go to Insurance Ireland for a clearer picture of the market."
The EU Commission said the purpose of the Insurance Link system is to facilitate the detection of potentially fraudulent behaviour by insurance claimants, and to ensure the accuracy of information provided by potential customers to insurance companies and or their agents.
The commission does not question that data pooling arrangements can contribute to effective competition, but is concerned about who has access, it said.
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