The Minister for Finance, Paschal Donohoe, called in the insurance industry recently to pressure it to offer motor rebates during the Covid-19 crisis. The sector's trade body, Insurance Ireland, subsequently responded by announcing that most insurers had "signed up". So far, so good – some much-needed positive PR for insurers. In the long run, however, they may have shot themselves in the foot.
The Minister effectively asked the motor insurance industry to act collectively to adjust prices. A rebate is just another form of price adjustment. If, as appears to be the case, most insurers have acted collectively to adjust their motor premiums, in normal times this would be considered problematic under competition law. Collective action on price is a red flag for cartel behaviour.
Who cares if insurers act collectively on price, you might argue, as long as they adjust them downwards? Sure, isn’t that a good thing? Fair enough. But if the insurance industry can act collectively to adjust prices downwards now, what is to stop it from acting collectively to push them up in the future?
The Competition and Consumer Protection Commission (CCPC) is in a bind. If it ignores what the insurers have done, it is ignoring activity that looks like classic cartel behaviour. If it steps in, it is the party-pooper that stopped motor customers getting rebates in a crisis, and it would embarrass Donohoe.
The CCPC said on Monday that any collective action on price risks infringing European and Irish law. It suggested it was “monitoring” the action taken by the insurers. But it said it was precluded from saying if the move was illegal and it declined to comment further, save to say that it would assess it for “consumer detriment”. That sounded like code for “we’ll let this one go”.
The European Commission has been investigating Irish motor insurers for alleged cartel behaviour since last May. While the collective move on rebates last week bought the sector some goodwill here, it did it no favours at all when it comes to defending itself against allegations from Brussels.
