Despite the end of the CCPC’s formal investigation, the authority ‘is in no way giving the industry a clean bill of health’ when it comes to organisations’ culture around compliance

The Competition and Consumer Protection Commission (CCPC) in Ireland has secured legally binding commitments from six insurers operating in the country’s motor insurance market in a bid to stamp out price signalling.

As a result of the authority’s third investigation into the motor sector, which delivered its preliminary findings in September 2020 pertaining to actions undertaken in 2015 and 2016, the CCPC obtained six compliance commitments from six of the parties under investigation.

This includes AIG Europe S.A, Allianz, AXA Insurance DAC, Aviva Insurance Ireland DAC, FBD Insurance and AA Ireland.

These organisations have confirmed they will reform their internal competition law compliance programmes to adhere to the below requirements outlined by the CCPC:

  • Provision of an internal monitoring mechanism to detect, identify and report suspected breaches of the compliance programme.
  • Provision of a mechanism for employees reporting suspected breaches and protection for the employee that comes forward.
  • Appointment of a compliance officer who must report to the board of the organisation.
  • Regular competition law training on pricing practices and communications that are not permitted under the law.
  • Independent expert oversight of the compliance programmes, including various auditing and reporting requirements.
  • An annual submission to the CCPC demonstrating conformity with the commitment.

The CCPC has the power to start legal proceeding to enforce compliance with these commitments.

Speaking on this action, 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.”

Compliance reform

The CCPC initially opened its latest investigation after “public statements made by a number of parties in the [private motor] sector appeared to be forecasting with confidence that premiums would rise. At the time, consumers were reporting increases in their premiums”.

The CCPC was therefore “concerned that these statements could be considered price signalling and, along with other communications about pricing, a breach of competition law”.

Providing more detail on the investigation, 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 they were in breach of competition law and pointed to their existing compliance programmes and measures. However, the existence of a compliance programme 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.

“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.”

Culture towards compliance

The seventh party involved in the investigation which refused to commit to the CCPC’s proposals is Brokers Ireland, the merged organisation of former trade bodies the Irish Brokers Association and the Professional Insurance Brokers Association.

Brokers Ireland has a membership of 1,200 insurance and financial brokers that partner with major insurers within the sector, the CCPC said. The authority’s findings, however, “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”.

“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,” McHugh said.

“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.”

Following the investigation’s closure, CCPC has written to Ireland’s financial regulator, the Central Bank of Ireland, to highlight its cultural concerns about the motor insurance sector.

McHugh continued: “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.”

Insurance Times has contacted Brokers Ireland for comment.