Insurers are protecting historically high profits and premiums by locking out potential competitors from the Irish market, according to a new Competition Authority report.
Launching the authority's final report on competition in motor, liability and employers' insurance, its chairman, John Fingleton, said that the lack of choice in the market made it possible for insurers to enjoy "joint or collective dominance".
"This finding may have implications for some insurance underwriters in terms of obligations to self-assess their compliance with competition law," Mr Fingleton said.
It is illegal for businesses to abuse a dominant position in a given market. But Mr Fingleton said he did not believe that prosecutions could address the problems in the Irish insurance market.
He said the problems meant that competition in the Irish insurance market was "sluggish" at best.
"Profit levels for insurance companies are at historically high levels, but unlike a competitive market, new or existing companies do not appear to respond very quickly to the profitable opportunities in Ireland."
Motor insurance profits totalled €400 million in 2003, while liability underwriting earned a €100 million surplus in the same year, the report shows.
"Entry barriers arise because incumbent insurers have preferential or exclusive access to essential cost information," Mr Fingleton said.
He explained that companies seeking entry to different segments of the Irish market cannot get the information they need to assess the costs and risks they will face. For example, the report states that just two players hold 90 per cent of the young female drivers' market. It does not name them. However, it is understood that they are AXA and Hibernian.
Among its 47 recommendations, the authority calls for information on costs and claims in each segment of the Irish market to be made available.
The head of the authority's monopolies division, Paul Gorecki, said that the problem meant that consumers and businesses end up being "locked in" to one insurance company.
Consumers and businesses also have limited scope for shopping around for alternatives because they are only allowed a short time to renew their policies. Mr Fingleton pointed out that consumers get 15 days to renew motor policies, which are standard products, while figures obtained by the authority show that close to half of all businesses get less time to renew far more complex liability cover.
The authority last year pointed out that insurance brokers' commissions were growing at a faster rate than premiums. The report shows that between 2000 and 2003, premiums increased by 120 per cent and intermediaries' earnings grew by 184 per cent.
Mr Fingleton said that there was no clear explanation for this. However, he pointed out that there is a conflict between the percentage-based fees charged by brokers and their duty to get the best deal possible for their customers.
The authority expects that the Irish Financial Services Regulatory Authority will be able to implement many of its recommendations.
