Vivas Health, the newest entrant to the Irish health insurance market, has lodged an official complaint with the European Commission claiming the State is protecting the VHI from real competition.
Vivas's chief executive Oliver Tatton claimed today that the VHI is "effectively receiving state aid" as the former State-owned monopoly is exempt from the regulatory requirements imposed on other health insurers.
The Department of Health has responded by announcing that it will clarify the corporate status of the VHI in a bill to be published later this year.
The exemption allows the VHI to "tie-in" customers by offering deals on non-health insurance products, a practice denied to other insurers who operate in each market under a licence from Ifsra.
Mr Tatton said health insurers were not playing on a level playing field as the VHI's health insurance operation is not regulated by Ifsra but by the Department of Health and Children.
While exempt from Ifsra in the health insurance market, the VHI is subject to the regulator in the sale of other financial services. VHI has sought permission from the Government to diversify into other financial service, possibly including pension products.
Mr Tatton also claimed the VHI has an unfair competitive advantage as it is not required to carry solvency reserves which other companies are required to do to cover emergencies.
Mr Tatton, who is a former chief executive of VHI, said the company has been recklessly running down its reserves in recent years at a time when regulators are imposing tighter regulations on competitors.
Vivas launched on the Irish market last October and is the only commercially-driven company operating in the sector.