Motor insurers set to introduce new compliance measures following CCPC investigation

August 20, 2021

The Competition and Consumer Protection Commission (CCPC) has secured legally binding commitments from six parties that were under investigation in the private motor insurance sector. AIG Europe S.A., Allianz PLC, AXA Insurance DAC, Aviva Insurance Ireland DAC, FBD Insurance PLC and AA Ireland Limited have agreed to reform their internal competition law compliance programmes (details of the commitments are provided below). A seventh party, Brokers Ireland (formerly the Irish Brokers Association and the Professional Insurance Brokers Association) has refused to enter into similar commitments. This is the third investigation the CCPC has undertaken in the sector. Upon closing the investigation, the CCPC has written to the Central Bank of Ireland outlining its concerns about the culture of the industry and the repeated interventions that have been needed to address issues in the sector.

Speaking today, Brian McHugh, Member of the Commission with responsibility for Competition Enforcement and Mergers, said:

 “Businesses are required to set their prices independently. Any form of pricing statements and suspected coordination that could manipulate future pricing raise serious concerns under competition law, as this can impact on competition and ultimately the price consumers pay. The potential for consumer harm is particularly high in the motor insurance market as consumers cannot avoid taking out a policy if they are to drive legally.”

The CCPC opened this investigation on foot of public statements made by a number of parties in the sector which appeared to be forecasting with confidence that premiums would rise. At the time, consumers were reporting increases in their premiums and the CCPC was concerned that these statements could be considered price-signalling and, along with other communications about pricing, a breach of competition law. During the course of the investigation, a considerable volume of information which included the content of interviews carried out under summons and email correspondence between industry participants were examined. The CCPC also continued to monitor industry commentary on private motor insurance premiums and observed no further statements of concern.

Speaking about the investigation, Mr McHugh said:

“We issued preliminary findings to seven parties in September 2020, alleging that these organisations had engaged in anti-competitive cooperation over a 21-month period during 2015 and 2016. All of the parties denied that they were in breach of competition law and pointed to their existing compliance programmes and measures. However, the existence of a compliance program is of little value unless, when tested, a business and all of its employees can demonstrate that compliance is an integral part of the culture and working practices of the company. The CCPC did not accept that adequate compliance measures were in place in these businesses, as robust compliance programmes would have identified and flagged the behaviours of concern that were under investigation.

Following constructive engagement with the CCPC, six parties have agreed to implement a number of compliance reforms across their companies to prevent breaches of competition law and which will support whistle-blowers who may come forward. The fundamental value of compliance programmes is the prevention or early detection of compliance failures. Robust compliance programmes, with independent expert oversight, will also assist the companies to embed cultural and operational changes throughout their organisations. We welcome the engagement and commitments provided by the companies and we view this as a positive step in ensuring that a commitment to compliance is a high priority for these businesses.”

Brokers Ireland, whose membership comprises over 1,200 insurance and financial brokers and who partners with a number of major insurers, declined to enter into legally binding commitments. The CCPC’s preliminarily findings identified specific conduct and behaviour by the Irish Brokers Association, one of the two associations that amalgamated to form Brokers Ireland, which raised serious competition concerns.

Speaking about Brokers Ireland’s refusal to enter into legally binding commitments, Brian McHugh, said:

“It is the CCPC’s view that Brokers Ireland, a representative body for insurance brokers, had a responsibility to fully address the conduct of its predecessor organisation, the Irish Brokers Association, which raised competition law concerns. By signing an equivalent agreement to that of the other six parties, Brokers Ireland would have, in the CCPC’s view, demonstrated its commitment to compliance in the future.

Competition law compliance supports markets to operate in a fair and competitive way and ultimately to the benefit of consumers. Legally binding commitments with independent oversight and regular reporting would have signalled an understanding of the importance of having in place a compliance programme that can withstand external scrutiny and embed a culture of competition law compliance in the trade association and their membership of brokers. The fact that Brokers Ireland did not enter into legally binding commitments, in the CCPC’s view, arguably calls into question the organisational attitude towards compliance.

The CCPC has invested considerable time and resources over the years in the insurance market, investigating business practices and advocating on behalf of consumers. And whilst this particular investigation may have come to an end, the CCPC is in no way giving the industry a clean bill of health. In this context, the CCPC has written to the Central Bank to outline broader cultural concerns in the industry which have come to light during the course of the investigation.

From the CCPC’s perspective, we will continue to play our part and monitor the activity of trade associations as well as businesses in the insurance sector. We are available to assist the Central Bank of Ireland as it carries out its role in regulating and overseeing conduct supervision and as it looks at wider cultural issues in the financial services sector.

Finally, as the CCPC’s powers are set to be considerably strengthened this year with the anticipated enactment of the Competition (Amendment) Bill, we strongly advise businesses and trade associations in all sectors, to ensure that they take steps to comply with competition law including putting in place robust compliance procedures.”

Details of the Commitments Obtained

The commitments require each company to implement and maintain an appropriate internal competition law compliance program, or enhance any existing programmes, to include:

  1. provision of an internal monitoring mechanism to detect, identify and report suspected breaches of the compliance programme;
  2. provision of a mechanism for employees reporting suspected breaches and protection for the employee that comes forward;
  3. appointment of a compliance officer who must report to the Board of the organisation;
  4. regular competition law training on pricing practices and communications that are not permitted under the law;
  5. independent expert oversight of the compliance programmes including various auditing and reporting requirements;
  6. an annual submission to the CCPC demonstrating conformity with the commitment.

The CCPC can take legal proceedings to enforce the agreement should any party fail to comply.

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