Business Opinion/John McManus:It now turns out the Tánaiste did not, as reported in some quarters, say last week that consumers have only themselves to blame for high prices. It's a pity, because it is about time that somebody said it.
Last Friday, this paper carried a survey of the cost of insuring a 20 year old house in Dublin. Ten companies were asked to quote for buildings cover of €160,000 and contents cover of €40,000.
The quotes that came back ranged from €367 to €512, a difference of €145 or 40 per cent. (The cheapest quote was from One Direct, if you are interested).
It would seem pretty clear that the customers of the other nine companies are paying too much for house insurance. It would also seem pretty clear that this includes the vast bulk of the house-owning public as One Direct is a small player compared to the likes of AXA, AIB, Hibernian and Bank of Ireland.
So, who is to blame if it is not the consumer?
It would be tempting to blame the insurance companies, but they do not force you take out a policy with them. They merely quote you the premium and leave it up to you whether you accept. In addition, they are subject to a host of regulatory checks and balances that are meant to counter high pressure sales techniques and the like.
The Government also is relatively free from blame. It regulates the insurance companies, but is primarily concerned with issues such as solvency and plays no part in setting prices.
Unlike the motor insurance or liability insurance markets, there is no problem with the cost of claims or the size of compensation payments that require attention by the Government.
The Government probably does have a case to answer in so far as its handling of the economy has seen massive inflation in both house prices and construction costs.
This obviously has a bearing on premia, but does not explain why some people appear to be paying up to 40 per cent over the odds for house insurance.
It is hard to escape the conclusion that the reason they are paying to much is that they can't be bothered to shop around. I suspect that if you asked the vast majority of AXA's household policy holders if they bothered to ring around for competing quotes when they got their renewal notices, they will say no.
In the words - or not as it turns out - of the Tánaiste: it is their own fault.
The next question is whether it is the responsibility of the Tánaiste or the Government to wise these people up.
Here we stray into the arena of political ideology and all the arguments and counter arguments about the nanny state, free markets etc.
But this quagmire can be neatly sidestepped if you accept that the Government's job is to manage the economy in general and inflation in particular. Based on the above, it would seem a pretty safe bet that anything that can be done to makes consumers more discerning will bring down prices.
There are a couple of things the Government could do in this regard. One of which is to encourage a strong consumer lobby.
The Consumers Association of Ireland (CAI) has something like 8,000 members, which accounts for less than 1 per cent of the consuming population. Its primary function seems to be to provide outraged comment for journalists and a platform for Eddie Hobbs, its finance spokesman who also runs his own financial services company and consults to several financial institutions.
The organisation is kept alive with an annual subvention of around €60,000 a year from the Government. If the Government wants consumers to be more assertive, then it could demand some reform of the CAI in return for its money.
Another - possibly more attractive - option might be to reform the retail planning guidelines which limit the size of retail developments and have kept Ireland free of out-of-town hypermarkets and companies such as Ikea. Allowing companies such as Ikea into the Irish market could only heighten cost consciousness amongst Irish consumers.
Removing the guidelines would also allow the likes of Tesco and Marks & Spencer to operate stores that allow them offer their full range of products and also enter sectors such as petrol retailing.
The same goes for deep discounters such as Lidl and Aldi. The enthusiasm with which these retailers would promote both their new stores and low prices could only educate consumers.
Changes to the Retail Planning Guidelines are "under active consideration" as is the repeal of the Groceries Order which bans below-cost selling.
Despite recommendations from a number of quarters to abolish it, the Tánaiste has kept the order in place, in part because of ferocious lobbying from various vested interests, most of whom overlap with the supporters of the retail planning guidelines.
Repealing the Groceries Order is the most politically risky of the three proposals, but none of them is very attractive.
One suspects that with inflation on the way down - it's expected to be down at 2 per cent by the end of the year - none of them will ever see the light of day.
Good job Irish consumers are so stupid or we might just ask why.
jmcmanus@irish-times.ie
