Companies cannot form cartels but regulators, it seems, are allowed to. The extraordinary move by the Competition and Consumer Protection Commission (CCPC) to enlist the help of the Central Bank of Ireland (CBI) to bring defiant insurance brokers to heel opens a new front in the battle between regulators and the companies they oversee.
ow it appears that where one body lacks the powers to enforce rules effectively, it may seek to coordinate with complementary agencies that have more adaptable tools for the task at hand.
Thus, the CCPC has asked the CBI to be the hammer to its anvil, to crush Brokers Ireland between them for not getting on board with a new oversight regime to stop the odious practice of “price signalling”.
The CCPC found evidence, it says, that the Irish Brokers Association – the predecessor organisation of Brokers Ireland – coordinated anti-competitive behaviour between private motor insurers, helping them tip each other off to impending price rises.
But Brokers Ireland rejects the allegations and is not joining the six main motor insurers in a new CCPC-led effort to beef up compliance in the industry.
Without a finding by the courts that Brokers Ireland broke competition law, that’s as far as the CCPC can go.
But the Central Bank has made a big show in recent years of emphasising the key role of culture in driving proper behaviour in financial organisations. So, the CCPC made a direct appeal to the Central Bank’s pet issue.
“It is the CCPC’s belief that there are fundamental cultural issues in the insurance industry which are harmful for consumers and businesses,” commission member Brian McHugh wrote in his letter to the CBI director general of financial conduct, Derville Rowland.
Those issues have led to three major investigations into the insurance sector in recent years, pulling in not just the CCPC and Central Bank, but the Oireachtas, the European Commission and various Government commissions set up to reform the industry. These involve not just price-signalling, but also so-called “loyalty penalties”, whereby long-term customers get worse pricing than new customers.
The industry also had to be sued into compliance with its own business interruption policies. Meanwhile, hundreds of businesses can’t get liability insurance at any price.
What they all have in common is that the consumer pays and pays and pays. That certainly seems like evidence of a common culture, one of impunity.
That culture has arguably persisted for so long in Ireland because there is little to no credible threat of real consequences for questionable behaviour by insurance firms.
If the CBI runs with the CCPC’s proposal, that could change things. In the meantime, the noose is tightening around cartel activity, as the CCPC is set to get new policing powers under forthcoming legislation.
The Central Bank, coming from the other side, will now be able to go after “bad bankers” personally under new authority granted by the senior executive accountability regime.
The six main motor insurers seem to have received the message. Brokers Ireland seems determined to fight on two fronts.