Keeping schtum about insurance premiums

INSURANCE companies look a little friendless after the last week. The Competition and Consumer Protection Commission (CCPC) launched an investigation into whether insurers were signalling price increases in an anticompetitive way.

The suspicion is not that insurance company executives sat in a smoke-filled backroom somewhere and agreed insurance premium increases. The question is whether consistent public statements by insurance executives saying they were going to put up premiums in the future were signals for others. One company executive says prices will go up by 10pc this year. Competitors take note of that and decide to do likewise.

CCPC executives told the Oireachtas committee this week that there can be unspoken co-ordination, which it wants to explore. It also means consumers are softened up for price increases and can be discouraged from shopping around because they just assume everybody is putting up prices by the same amount.

Price signalling is a relatively new concept in competition probes, and it has been quite controversial. It is also very difficult to secure a criminal conviction because it can be very hard to prove.

The alternative is for a probe to take place and the CCPC to take a Civil Court action.

The CCPC told the committee that it wrote to Insurance Ireland about the matter last October, but then just kept an eye on public comments by insurance executives in 2016, especially from firms that were back in profit.

Checking newspaper records, I found one executive saying in March how prices would go up again this year, but the rises would be lower on average than in 2015.

In June 2016 another insurance chief executive said he was going to increase prices by another 5pc by the end of the year, bringing it to a 10pc hike for 2016.

Price signalling legislation was introduced in Australia in 2012 and has been controversial. The Italians have been most effective with theirs, resulting in a number of investigations including one into a cartel of pasta producers who were found to have co-ordinated their price increases through press releases, press conferences and media interviews. In order for the CCPC to take a successful case, it would have to show that signals were given, that they were noted by competitors, influenced competitors and prices went up by more than they would have without the signalling taking place.

That would not be easy. But hopefully the existence of the probe and the demands for more transparency will give insurers pause for thought about future premium hikes.

If the CCPC is successful, insurance executives will stay quiet about prices in the future. What will they do instead?