Irish insurance companies are making excessive profits due to high barriers to entry and the difficulties consumers have in shopping around for better deals, the Competition Authority said today.
In its final report into the non-life insurance market, the authority identifies serious shortcomings that have helped Irish insurance companies earn higher profits than their international peers - even at a time when insurance costs are falling.
According to the report, motorists, businesses and voluntary groups are locked in to their current suppliers - and potential entrants are locked out of many profitable segments of the insurance market.
Consumers are limited in their options when seeking new cover because of the limited information available to them about their claims history and fees charged by their brokers, the authority said.
Business are also disadvantaged by the short notice period before renewal which limits the scope for shopping around for better deals.
On the supply side of the market potential entrants are deterred by the lack of transparency in the gathering of industry statistics and accident rates by incumbent firms.
The report highlights the brokerage market as a particular bottleneck in the market. Dr Fingleton said instead of being part of the solution brokers are part of the problem because of the current tying of brokers to companies provides brokers with little incentive to offer rivals' lowest quote to customers.
The authority makes 47 recommendations aimed at levelling the insurance playing field - including centralised gathering of cost information, greater transparency in claims, a certified claims history for customers, and longer renewal notices.
Competition Authority chairman John Fingleton said it was up to Government and financial regulator IFSRA to implement the recommendations of the report but said there was a will among policy makers to address the issues because of the impact high insurance costs have had on the wider economy.
The non-life insurance sector in Ireland is worth €4 billion a year or €3,000 to every household in the country. If greater competition reduced costs and prices by even 5 per cent the gains would be €200 million annually or more than €150 for each household in the country, Dr Fingleton said.
The Minister for Enterprise, Trade & Employment Micheál Martin said "considerable progress" had been seen in the reform of the insurance sector.
"This has resulted in significant reductions in insurance premiums for motor and liability cover and consumers and business alike have reaped the benefits.
But he added: "We should never become complacent and we should never assume that we have done everything that needs to be done. From a competition point of view, I am determined to ensure that the insurance business in Ireland operates in an environment that is conducive to encouraging new players into the market."
Irish Insurance Federation chief executive Michael Kemp welcomed the publication of the report.
"The report did not find that there is a cartel, collusion or price fixing arrangements operating in the Irish market among insurers. We support the majority of the Authority's recommendations, most of which are addressed to the financial regulator, Ifsra or the Government.
"The report notes that new or existing insurers have been sluggish to respond to new market opportunities and this is attributed to lack of access to market information.
"However, access to information is not really the issue. Detailed market information is published by the financial regulator, Ifsra, based on annual statutory returns from insurers.
"In addition, insurers are also possibly unique as a sector in that the IIF as its representative body, collates and publishes statistics at industry level in the form of its annual Factfile."