Complaints spark major insurance probe

THE Competition Authority is to conduct a major investigation of the insurance industry after it was revealed that complaints about insurance were the single largest category received by the organisation last year.

Competition Authority chief executive John Fingleton said the number of complaints reflected a “general malaise” among the public about insurance costs, although most did not identify any specific breaches of the Competition Act.

“People were concerned about issues ranging from lack of choice, rising prices, methods used by insurance companies for the assessment of risk to tied selling,” said Dr Fingleton.

He said a detailed report on a study of the regulatory system and structures of motor insurance, employer’s liability and public liability insurance was scheduled to be completed early next year. It will examine the level of competition in markets such as motor insurance, where three companies account for almost 70% of the market.

Dr Fingleton said his key concern was that any costs to insurers were passed on to consumers.

The authority is also expected to issue recommendations on assessment of compensation, methods of tackling bogus claims and the issue of whether insurance firms should be allowed to access data on penalty points.

Dr Fingleton said it was vitally important that the insurance market worked well for consumers and business because income from non-life insurance accounted for about €4,000m, or 2.9%, of GDP.

He told the Oireachtas Committee on Enterprise and Small Businesses yesterday that it was important to distinguish between the long-term level of insurance premiums and recent price hikes, which were not unique to Ireland.

“To a large extent, increases in the past 18 months appear to have been driven primarily by international factors,” said Dr Fingleton.

Events such as September 11 as well as the general decline in equity markets in had contributed significantly to insurance costs, he said.

He said the results of a separate study being conducted by the Competition Authority of several professions, including barristers and solicitors, could also help address concerns about anti-competitive practices which affect insurance costs. Litigation costs add on an estimated 42% to the final settlement bill in personal injury cases.

Meanwhile, IBEC yesterday called for urgent reform of the insurance sector because of crippling insurance costs for companies, which it said had more than doubled in the past two years. Assistant director Tony Briscoe described the outlook on insurance costs as “dismal and uncertain”.

“Many companies find it impossible to get alternative quotations for cover as the market has contracted for new business and only a handful of insurers are offering cover for certain areas of commercial risk,” he said. “The present situation is not sustainable.”

He said failure to reform the industry would make insurance unaffordable and even unavailable for many Irish firms.

Meanwhile, Irish Financial Services Regulatory Authority chief executive Liam O’Reilly said he would be working with the insurance industry to ensure there were improvements in how risk was measured and understood.

He said the issue of transparency of products was a priority for the IFSRA: “The public expects to understand the products they buy and what those products cost. Any other approach is indefensible.”