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European Commission Preliminary View – Insurance Ireland Breached EU Competition Law

  • Ireland
  • Corporate

25-06-2021

On 18 June 2021 the European Commission (the “Commission”) announced that it had informed Insurance Ireland, an association of Irish insurance providers, of its preliminary view that it had breached EU competition rules in engaging in practices that restricted competition in the Irish motor vehicle insurance market. This briefing note considers the investigation to date, the next steps and what it potentially means for the Irish insurance market.

Background

Insurance Ireland, an association of insurance companies and agents active in the Irish motor insurance sector with 90 percent of the insurers in this market as members, operates a data-sharing platform called ‘Insurance Link’, the use of which it offers to members of the association. The platform comprises a non-life insurance claims data pool and a facility for users to request certain data about such claims. Its members upload data on insurance claims to the database on an ongoing basis for use by other members. Insurance Ireland states that the purpose of the system is to facilitate the detection of potentially fraudulent claims and to ensure the accuracy of information supplied by potential customers. Since 2009, access to this system is by way of membership. As part of this process applicants must first fulfil membership criteria as laid down by Insurance Ireland and go through what the Commission describes as “an unpredictable application process” in order to gain access to the ‘Insurance Link’ system.

On 4 July 2017 the Commission, along with the Irish Competition and Consumer Protection Commission, carried out a number of unannounced inspections on Irish insurers as part of an investigation into alleged anti-competitive practices relating to motor insurance premiums in Ireland. The premises of Insurance Ireland was also inspected at this time and Insurance Ireland acknowledged that this inspection was in relation to “databases concerning claims history information and drivers' penalty points.”

As a result of these inspections, the Commission opened a formal investigation into Insurance Ireland on 14 May 2019 to assess whether the conditions of access to ‘Insurance Link’ had the effect of restricting competition in breach of Article 101 of the Treaty on the Functioning of the European Union (the “TFEU”). The Commission acknowledged that certain data pooling systems can contribute to effective competition in the market as it may directly benefit consumers in terms of ensuring more suitable products and competitive prices. However, such arrangements must nonetheless be compliant with competition rules. Furthermore, in certain situations the operation of such systems can lead to anti-competitive practices if it places certain operators at a disadvantage through a lack of access, or on the other hand, it can be said to place members of Insurance Ireland at an advantage if they gain an awareness of the market strategies of their competitors through the use of the ‘Insurance Link’ system. In this case the Commission’s investigation analysed whether the conditions imposed on companies who wished to apply and participate in the system placed them at a disadvantage compared to those companies who already had access to the database.

Statement of Objections

Now that the Commission has informed Insurance Ireland of its preliminary findings by way of a Statement of Objections, Insurance Ireland will have a right of reply. The Commission states that the preliminary findings of the investigation show that “Insurance Ireland arbitrarily delayed or de facto denied the access of certain insurers and their agents to Insurance Link” and that in some instances they were effectively denied access for several years through use of an “obligatory membership criteria” as a pre-condition of access to ‘Insurance Link’.

The Commission contends that this lack of access or delayed access has the effect of placing companies at a competitive disadvantage compared to those who already have access. This competitive disadvantage can result in the reduced possibility of competitive prices and choice of suppliers for consumers. The Commission also noted that a lack of access to relevant data contained within the ‘Insurance Link’ system has the possible effect of hindering cross-border trade within the Single Market and potentially partitioning it.

If the Commission’s preliminary findings are ultimately confirmed, Insurance Ireland will be held to have infringed Article 101 TFEU by engaging in conduct that prevents, restricts or distorts competition within the EU's Single Market.

Next Steps

The Statement of Objections is not a conclusive determination by the Commission and only forms a part of the preliminary stage of competition proceedings. Insurance Ireland now has a right to provide a written reply and the Statement of Objections will have set out a timeframe within which to respond. Insurance Ireland also has the option to request an oral hearing, as part of the written reply, which would be conducted by an independent Hearing Officer.

Having examined any submissions made by Insurance Ireland, whether through written reply or an oral hearing, if the Commission is not satisfied with Insurance Ireland’s defence, the Commission can proceed to make a decision that may result in the imposition of fines of up to 10% of overall annual turnover generated in the business year before the adoption of the decision. Alternatively, the Commission may proceed to make a commitment decision, where no conclusion is made as to the existence of an infringement of competition law and no fines are imposed. Under this option Insurance Ireland may put forward commitments to address the competition concerns and, if the Commission is satisfied with these commitments, they become legally binding on Insurance Ireland.

What does this mean for the Irish insurance sector?

In recent years there has been an increased spotlight on high insurance premiums caused by fraudulent insurance claims in Ireland. Whilst the stated purpose of the ‘Insurance Link’ system is to facilitate the detection of potentially fraudulent behaviour by insurance claimants and to ensure the accuracy of information provided by potential customers to insurance companies and/or their agents, the preliminary findings of the Commission cast doubt on whether such data sharing can be an effective tool to be used by insurers in detecting fraudulent claims when access to such a data sharing tool is curtailed by obligatory membership of a trade association (such as Insurance Ireland in this case) along with an unpredictable application process resulting in years of delays before finally gaining access to the data sharing tool, and a competitive disadvantage vis-à-vis other insurance providers / agents.

It remains to be seen how Insurance Ireland will respond to the Commission’s preliminary findings.

For more infortmation, please contact:

Sean Ryan, Partner, Corporate - SeanRyan@eversheds-sutherland.ie 

Katie Haberlin, Senior Associate, Corporate - KatieHaberlin@eversheds-sutherland.ie 

Shane Kelly, Solicitor, Corporate - ShaneMKelly@eversheds-sutherland.ie 

Sean Ryan, Partner, Corporate - SeanRyan@eversheds-sutherland.ie 

Katie Haberlin, Senior Associate, Corporate - KatieHaberlin@eversheds-sutherland.ie 

Shane Kelly, Solicitor, Corporate - ShaneMKelly@eversheds-sutherland.ie