Car insurers in the dock over premium hikes

Car insurers, who have hiked premiums by 70 per cent over the last three years and sought to place the blame on motorists and lawyers, are to be investigated by the Competition and Consumer Protection Commission amid concerns that they are operating an illegal cartel.

The Commission has issued subpoenas to insurers over suspicions of collusion in raising prices on a range of premiums. The statutory body suspects some motor insurers may be breaching competition law by openly signalling to one another when they are planning on hiking their prices.

In a statement the CCPC said: “Where we get enough evidence to show that a cartel may exist, the CCPC will submit a file to the Director of Public Prosecutions with a recommendation that the parties involved be prosecuted on indictment.”

The summonses were issued as the legal profession yesterday united to condemn the insurance industry for its lack of transparency and for increases in premiums branded by the Law Society as “extraordinary, shocking and excruciating”.

In a statement to the Oireachtas Joint Finance Committee, Law Society senior vice president Stuart Gilhooly and its director general Ken Murphy said that for years insurers had engaged in a price war which saw them quote “unsustainably low premiums while insuring bad risks.”

They added: “The inevitable upshot has been an increase in premiums to restore profits and thereby compensate for these poor business decisions.”

The Law Society also drew attention to the current lack of competition among insurers and their poor investment of motorists’ premiums. Mr Gilhooly, said the cause of the increases in premiums “lies inside the closely guarded books of the insurance industry”.

He went on: “It is also common knowledge, though rarely admitted by the industry, that much of their profits emanate from the investment of the premium income.

“It is abundantly clear that recent returns have not been remotely the same levels that they would have experienced in the past, given the recent volatility of global markets.”

Mr Murphy added that he believed that insurers had been “signalling” proposed increases to each other.

Paul McGarry, chairman of the Council of the Bar of Ireland, argued that mismanagement of the insurance industry between 2012 and 2014 had led to increases in premiums to “restore profitability”.

He added that a “lack of transparency and incomplete disclosure of data” by the industry was a “significant barrier to a comprehensive understanding of the claims environment”.

Mr McGarry also pointed out that there had been no significant increase in the numberof claims processed by the Injuries Board and award levels remained consistent.

In addition, between 2006 and 2013, barristers’ professional fees decreased by between 26 and 50 per cent.