Uncomfortable questions for bosses and the Central Bank
So much for a sleepy summer. Insurance executives, who were turning their thoughts to lazing on a sun-drenched beach with a cocktail in hand, were given a sharp jolt of reality yesterday morning.
A co-ordinated dawn raid on the offices of motor insurance bodies and insurers in Dublin shocked the executives.
Maximising the element of surprise, the raid by competition enforcers from the European Commission's Competition Directorate was unannounced and unexpected. To say it rattled the head honchos who run motor insurance companies would be an understatement.
It is understood that 45 officers from the EU Competition Directorate, and officers from the State's competition watchdog, the Competition and Consumer Protection Commission (CCPC), were involved. Gardaí had an observer role.
It is part of a probe into alleged cartel activity in the insurance industry.
Competition watchdogs are concerned about allegations of price fixing in this market.
The EU competition regulators fear that new players are reluctant to come into the Irish market because they find it hard to get access to databases on drivers and claims histories.
As most of the insurers here operate across the European Union, the European Competition Directorate is concerned to ensure that the single market for insurance operates without hindrance.
Our own CCPC has been probing the motor insurance sector here since last September. It has already sought documents and witness statements.
But the involvement of European competition regulators in searches of offices here was a surprise.
They want to ensure that it is an open market, with new entrants not facing any obstacles to setting up in Ireland, from the likes of a cosy cartel.
A cartel is a conspiracy against consumers to keep prices artificially high. Insurers have been quick in the past to say they have not done anything illegal, and certainly no case has been proven against them as yet.
But with premiums rising by as much as 70pc at one stage there is concern that this is a dysfunctional insurance market, something that would cause new entrants to shun it.
The raids raise uncomfortable questions for the Central Bank. It has extensive data on the insurers here.
It has said in the past that it has been lied to by the insurance industry. It also revealed, in letters obtained by this newspaper, that it told insurers to raise their prices in the past over fears premiums had been unsustainably low for too long. For their part insurers have never really come up with convincing arguments for why motor premiums have gone up so much in the last three years.
They have advanced many reasons for the huge premium hikes. They blame suspicious and fraudulent claims and the prevalence of hard-to-disprove whiplash.
But it is also a fact that they are losing money on investments, settle claims too early, have under-priced and under-reserved in the past and are poorly managed.
Now they and their representative body have been raided over allegations they have been acting like a cartel.
One thing is for certain, few motorists will have any sympathy for their plight.