Insurers face probe into price-fixing allegations
Major insurance companies have been summoned to give evidence to the State's competition watchdog over suspected breaches of competition law.
The Competition and Consumer Protection Commission (CCPC) said it suspected that motor insurers were signalling price increases to each other before raising premiums.
This is seen as cartel-like activity - where players in a market who are supposed to be competing against each other instead act to regulate prices.
Drivers have been hit by a 68pc surge in the average cost of a premium in the last three years. In the last year alone, premium rates have shot up by a third.
Now the competition body said it had issued witness summons, requiring major insurers and brokers to give evidence to it under oath, over claims they are openly signalling up-coming increases in motor insurance premiums.
Insurers could face fines of up to €5m if the competition body can get the Director of Public Prosecutions to take a successful case against them.
Isolde Goggin, chairperson of the CCPC, said: "Statements by senior industry players have raised serious suspicion as to whether there is a link between these messages and subsequent price increases."
Insurers have been indicating further premium increases in the next year each time they have reported financial results.
Some of those indicating there are more hikes to come are actually making profits.
This can be interpreted as cartel-like activity, which is illegal.
However, they are likely to argue that the Central Bank has been encouraging them to raises prices as their reserves have ended up being depleted.
The new probe - the first major test for the Competition Authority - was merged with a National Consumer Agency almost two years ago to form the Competition and Consumer Protection Commission.
It comes after the director general of the Law Society, Ken Murphy, said that as a former competition lawyer he was concerned that insurers were signalling to each other to raise premiums.
He told the Oireachas Finance Committee: "Insurers are signalling to the market that there are more price rises to come. That should not be happening in my view. It is dubious practice."
Verona Murphy of the Irish Road Hauliers Association told the committee her members feel there was no real competition in the market.
When asked whether she thought the insurance industry in Ireland is a cartel, Ms Murphy said: "If it walks like a duck and sounds like a duck, well then..."
Insurance Ireland confirmed it will co-operate fully with the commission.
Meanwhile, junior minister in the Department of Finance Eoghan Murphy said the launching of the probe was significant.
"It is another signal of the need for greater transparency in the industry and closer scrutiny by government. We need urgent action to address the punitive hikes in motor insurance," Mr Murphy said.