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38 Seiten, Note: First Class Honours (A)
2. Insurance Law in Ireland
2.a. The Claims Process
3. Competition Act 2002
4. The Place of the Consumer in Competition Law
4.a. The Rights of the Consumer, a Competition Law Objective?
4.b. The Role of Competition Authorities
5. The Competition Authority in Ireland
6. A European Stance
7. Assessing the Market
7.a. Anti- Competitive Foreclosure
7.b. Vertical Restraints
7.c. The Irish Market
8. The American Stance
I. Table of Legislation
II. Table of Cases
VI. Web Articles
VIII. Primary Sources
This paper hopes to give a closer examination and overview of an issue which is ever prominent, but often overlooked. Insurance Steering in the Motor Trade Industry is the practice by where insurers pressure, mislead and forcefully imply to consumers that they must use one of their “approved” or “preferred” repairers. While this practice benefits the insurance company, and often even the consumer due to financial incentives to take the insurers advice, it has led to many body-shops across the country being excluded. Any bodyshop not in this exclusive network of repairers have found themselves in a rather precarious position. While complaints have been made that this is anti-competitive and harming the market, as well as consumer welfare and choice, the claims have failed to be heard in Ireland.
Looking towards other jurisdictions both America and the UK have found themselves dealing with similar issues. The American perspective shows us where case law could potentially take us years down the line, as anti-steering legislation has already been enacted in some states. While the UK can show us how to deal with those first few stages of handling the issue, as is happening currently there.
This paper will aim to:
- Demonstrate how this practice is potentially anti-competitive
- Refer to relevant Irish, European and American sources
- Evaluate the current state of the market, particularly by utilising Irish primary sources (questionnaires and email correspondence)
- Assess the Insurance Law aspect
- Assess the Competition Law aspect
- Determine the role the consumer, and consumer welfare has in all of this
In Ireland activities of non-life insurance have been regulated since the 1930’s. Back as far as the Insurance Act 1936 reference is made to the “mechanically propelled vehicle insurance business” which recognised the need for insurance against loss or damage to, or arising out of, or in connection with the use of these vehicles, including third party risks. Similarly a parallel term for motor vehicle insurance including “all liability arising out of the use of motor vehicles operating on the land (including carrier’s liability)” can be found at a European level.
The obligation to insure has also been placed in a motor vehicle-specific light as it is listed as an obligation under the Road Traffic Act. Provisions in relation to obligations of both the insurer and an insured in respect of the approved policy are laid out, and said insurance is to be “against all sums without limit”.
Further Statutory developments in the area include the Insurance Act 1989, the Insurance Act 2000, and the Non-Life Insurance (Provision of Information) (Renewal of Policy of Insurance) Regulations 2007. The two former acts contain little mention of non-life insurance, and no mention specific to motor insurance. The latter however contains useful definitions of terminology relevant to the area: “insurance”, “motor insurance”, “private motor insurance” and “term”. Following this the main thoughts of the Regulations pertain to the ability of the Minister to require information and the rules for policy renewals.
The insurance industry is regulated by the Central Bank of Ireland. Under the Insurance Act 1989 the Central Bank has extensive powers covering all aspects of the insurance industry. It is the competent authority for the authorisation and ongoing supervision of insurers. Insurers must also comply with certain conditions: there must be a ‘class 10 undertaking’, within the meaning of regulation 2(1) of the 1976 EU Regulations. The undertaking must be carrying out non-life insurance in the State, from an establishment in the State with the correct authorisation to do so, or the undertaking must be for the purposes of carrying non-life insurance by way of services into the State from an establishment in another Member State. In addition to this the insurer must be a member of MIBI.
Utmost good faith is a principle characteristic of the insurance contract. It is a contract uberrimae fidei, based upon exercise of good faith by each party involved. The duty to disclose all relevant material facts is inherent in the nature of the insurance contract and any inequalities of knowledge on part of any party ought to be rectified as much, and as soon as possible. Often, a “co-operations clause” will be found in insurance policies requiring the insured to, for example, provide details of the loss, for the undertaking not to take any steps prejudicing the insurer’s position or for the undertaking not to settle with a third party. For example with motor insurance the insured is not obligated to admit liability to a third party. A breach of the insured’s duty to co-operate will defeat the claim. In the UK it has been held that prejudice is not a factor which has been taken into account when considering whether a claims co-operation clause has been breached.
There have been suggestions in the past that the insurance industry deserves an immunity from competition law. The Oireachtas rejected this, and there is no exception in the Competition Acts for any industry. In a case mirroring the issues arising in the motor trade industry, the Competition Authority refused to certify or license a notified agreement where a travel agency compelled its customers to purchase their travel insurance from a particular broker. The Authority objected to this and the arrangement was changed so that using this particular insurer was merely an option for customers. Seeing as this tying agreement was not allowed it is presumable the similar practice in the motor trade industry could be viewed in the same way. This, teamed with the added pressure placed on consumers, a degree of undue influence and offerings of financial incentives, all have a cumulative effect of making this a major issue in the industry.
Following a traffic accident there are a number of steps to be taken when making a claim. The National Claims Assessment Service provides information in layman’s terms as to what to do directly following an accident, but little as to how to deal with the insurance companies themselves. While individual insurance companies have individual procedures in place, it is important for the average policy holder to understand the process from an unbiased perspective. Consumer websites can help with this, www.consumerhelp.ie provides a basic guide as to what to do when making a claim. Proper claims procedure is outlined under the Consumer Protection Code 2012.
Often after a car accident, the (future) claimant will find themselves in an unfamiliar situation. Making a claim with your insurance company is not a task one undertakes on a daily basis. It is presumable that the party involved will be unsure of their situation. While certain research can be done on a personal level, people place their faith in their insurance company, comfortable in the knowledge that they know what is best. In this near state of vulnerability one could find themselves susceptible to the wills of their insurance company. As once stated “Insurance itself is not a problem. Suffering a loss without adequate protection is a problem. Insurance is part of the solution, but most people are more afraid of the solution than they are of the problem”. People desire for this situation to dematerialise as speedily as possible and thus are more than willing to go along with whatever they are told. This could have less than favourable consequences as insurance companies find themselves at a significant advantage, they have the knowledge and the power in this set up. In this flurry of claims and insurance jargon there is a tangible risk of basic consumer rights being abused. The Consumer Protection Code outlines these fundamentals, sections of particular relevance include that regulated entities:
- Do not recklessly, negligently or deliberately mislead a customer as to the real or perceived advantages or disadvantages of any product or service
- Do not exert undue pressure or undue influence on a customer
- Act honestly, fairly and professionally in the best interests of its customers and the integrity of the market
- Act with due skill, care and diligence in the best interests of its customers
This paper seeks to explore whether these general principles have been complied with. While insurance steering undoubtedly restricts consumer choice, is it at play in the motor insurance industry? Are the requests of insurance companies for consumers to use “approved” repairers made in utmost good faith and merely suggestions, or is there a more pressurised element to it, and is this in turn an anti-competitive practice?
The Irish Competition Act 2002 states in Section 4 that all agreements between undertakings which have as their object or effect the prevention, distortion or restriction of competition are prohibited. There is some ambiguity as to the actual meaning of this. “Prevention”, “distortion” and “restriction” are not defined in the Act. The Irish courts have generally favoured a “rule of reason” approach. It has been stated that if this provision is to be literally interpreted, virtually every form of business agreement could be said to be a violation. The Irish view, when assessing a potential breach of Section 4(1) is that the key consideration is definition of the relevant market. Under s4(2) an arrangement in breach of s4(1) may not be prohibited if it meets the efficiency conditions set out under s4(5). There are four conditions and the conditions in question must meet all four cumulatively:
1. Must contribute to improving the production or distribution of goods or services or to promoting technical or economic progress
2. While allowing consumers a fair share of the benefit
3. Does not impose on undertakings concerned terms which are not indispensable to the attainment of those objectives
4. Does not afford undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question
It is a safe assumption that insurance companies would attempt to have their preferred repairer arrangements come under these four conditions. It could be said that distribution of the service is improved through a more efficient channel, that consumers receive benefit from this and that all autobody repairers have the opportunity to enter a preferred repairer arrangement with them, thus not eliminating a substantial part of the market. While these may be valid arguments, the opposite could also be argued, that there is a hampering to the distribution of this service as full choice and disclosure is not being afforded, that consumers welfare is being damaged by this and that actually obtaining an arrangement of this kind with a large insurance company is simply not a realistic feat for a small bodyshop, thus leaving them closed off to the market.
EU opinion of the objective of competition law has evolved over time. In 1966 the conclusion was drawn that EU Competition law had the goal of achieving single/common market integration. This later developed into protecting the participants of the competitive process and effective competition. More recently the European Commission has put forward the idea that the leading objective is consumer welfare. In the case of GlaxoSmithKline it was argued that anything decreasing consumer welfare qualifies as anti-competitive conduct. While the General Court and the EU Commission agreed with this the Court of Justice did not, claiming that consumer protection is part of the structure of competition law, and it is this structure that EU competition policy has the goal of protecting. This is supported by Articles 101 and 102 of the TFEU, which are more concerned with the protection of the competition in markets, rather than consumer welfare. This being said, consumer welfare is an integral part of the competition structure. If competition in the markets is fair, improved welfare for consumers is a presumable knock-on effect from this.
The role of competition law is to oversee the whole competitive process, consisting of:
- The supply side.
- Competitive Environment
- No boundaries or unnecessary restriction on competition (including restrictive agreements)
- Different markets being suitable to different forms of competition due to differing product natures, consumer choices, etc.
- The demand side
- Product (or service) plus substitutes
Under this structure consumers and their welfare are not the ultimate aim of competition policy, but rather one of a few. One of the factors here cannot flourish without the other. They are all responsive elements, whose interplay and successful functioning result in satisfactory protection of competition policy, which is the main objective to be attained here.
The EU has broad powers when it comes to competition law, the ability to extensively investigate and place heavy fines on undertakings for wrongdoings. The €1 billion fine placed on Intel for abuse of dominant position demonstrates just how significant the EU has become in this field of law. However in 2003 National Competition Authorities were given the power to enforce EU competition law, thus creating a network throughout the Union. While response to this has generally been favourable, it is inevitable that there will be clashes between national and EU law on some issue at some point.
In March 2012, the UK decided to abolish the Office of Fair Trading (OFT) and the Competition Commission (CC) and combine together to form a single Competition and Market Authority (CMA). The CMA ultimately will separate the strands of consumer protection law and competition law. The CC has recognised that the role of a competition authority should be to protect competition through means of increasing welfare, productivity, economic growth and innovation, with a link to consumer protection, as competition benefits the consumer. However the OFT has expressed concerns that the division could potentially be harmful, as consumer protection law and competition law are so intrinsically linked it could be imperative to separate the strands. While both organisations agree consumer protection plays a major role in competition law the OFT sees it as the primary goal, while the CC sees it as one of many. The CC is of the belief that through promotion of competition law, consumer protection will follow, while the OFT believes that they should be implemented side-by-side.
In July 2014 the Competition and Consumer Protection Act was enacted in Ireland. Amongst other matters, this Act merged the Competition Authority with the National Consumer Agency. This is a move that would seem to suggest the Irish Authorities see consumer protection as on par with competition policy, rather than a mere, albeit important, factor of the process. The new body is called the Competition and Consumer Protection Commission, a name which supports the suggestion that great significance is placed on the Consumer Protection role, self-described as a “dual mandate”.
In 2012 the Central Bank published the Consumer Protection Code, which stated the entities were to act fairly, honestly and professionally in the best interests of consumers and the interests of the market. On foot of this (as well as a number of complaints and some political attention on the area ), the Competition Authority decided to take a long overdue look at the possibility of anti-competitive behaviour in the insurance industry.
In their Guidance Note on Preferred Repairer Arrangements in the Insurance Sector,  through very selective and often flawed reasoning, the Competition Authority comes to the conclusion that there is no infringement of Section 4 of the 2002 Act and /or Article 101 TFEU. The report focuses on arrangements in the motor vehicle and home insurance sectors, however it is the former which is the main subject. Throughout, the phrase “competition law and policy is to protect competition, not to protect firms that are having trouble competing” becomes somewhat of a mantra for the Competition Authority and is the sole basis behind most of its reasoning.
The benefits of preferred repairer arrangements are highlighted from the outset, it is submitted that the strong financial incentives, speed and efficiency all make these arrangements sound and worthwhile. Insurers are now more actively involved in claims management. “Claims are the largest costs that insurers face”, and these arrangements help lower and manage these costs for insurance companies. Given that the function of an insurance company is to pay out claims for its paying policy holders, the phrasing of this comment and tone suggest that it is somewhat of a burden on insurance companies and that they should be entitled to attempt to lower their expenditure in this area at all costs. One cannot help but see this as a somewhat flawed argument- seeking to minimise costs is one matter, whereas walking the line between competitive and anti-competitive behaviour is another.
It is said that effective claims costs management should benefit policyholders through lower premiums. “Should” is the optimum word here. While on paper this looks promising, in practice this would not foreseeably happen. The insurance industry is one with some oligopolistic features, if one insurer significantly lowers its premiums, others will presumably, follow suit. It is difficult to determine whether these “savings” would be passed on to policyholders or merely retained as profit. The Guidance Note provides no substantive evidence that this practice, which has been happening for a number of years now, has in fact benefited consumers in any way and relies upon vague auxiliary verbs to convey its point.
When assessing the exclusivity of preferred repairer arrangements the concept of anti-competitive foreclosure arises. On the surface, by pure definition standard it fits the situation at hand, firms being unable to access a significant proportion of the market due to the effect of an agreement or network of agreements. The Guidance Note finds that no evidence that these arrangements are exclusive and that even the cumulative effect of these arrangements would not be significant to a closing off of the market and potential elimination of competition for some. It is argued that consumers still have freedom of choice and that the preferred repairers are merely suggestions, however this is far from the case. It is a lack of information here that causes the problem. Consumers, suffering a car accident, find themselves in a vulnerable position, one they presumably are not in too often. Many people have a lack of understanding as to how the process of making a claim works and are susceptible to believing what their insurance company tells them, so when they are coerced and influenced into choosing a particular repairer, offered incentives to choose said repairer and not informed of the option of using their own local mechanic, it has the overall effect of hampering their freedom of choice. Although there is no outright obligation to use the preferred repairer on the consumer’s part it is implied that the obligation remains. To take a basic example a person making a purchase in a shop has a choice between product A and product B, however the seller only informs them of the availability of A and neglects to mention the potential availability of B. Theoretically there is still a choice on the customers part, but it unfairly influenced the external factors which place pressure on him to decide a certain way. This is similar to the process of selecting an autobody repairer following an accident, one finds themselves under the impression that one option (namely, the right to choose your own repairer) is unavailable, or not feasible from the insurer’s point of view. While an insurer may argue that the choice was always there, the lack of information pertaining to it means that in reality, its presence, or lack-there-off was redundant. While it can be claimed that consumers are capable of making the necessary informed decision of this matter to their own account, the fact remains that this is a complex area. This means there is a tangible risk that certain consumers are left exposed in a market where expectations of self-awareness are pitched too highly.
 Insurance Act 1936, section 3.
 European Communities (Non-Life Insurance) Regulations (1994) Schedule 1 (A)(10).
 Road Traffic Act 1961, section 56.
 Road Traffic Act 1961, section 62.
 Road Traffic Act 1961, section 56(1)(a).
 The Insurance Act of 2000 contains amendments of the 1989 Act, the 1936 Act, the 1995 Act and the Central Bank Act 1989.
 Non-Life Insurance (Provision of Information) (Renewal of Policy of Insurance) Regulations (2007), S.I. No. 74/2007.
 An insurance of one or more of classes 1, 2, 3, 7, 8, 9, 10 and 13 specified in Part A of Annex I to the European Communities (Non-Life Insurance) Framework Regulations 1994 (S.I. 359 of 1994).
 Means insurance of classes 3 (excluding land vehicles other than motor vehicles), and 10 (excluding carrier's liability) as specified in Part A of Annex I to the European Communities (Non-Life Insurance) Framework Regulations of 1994.
 “A policy of motor insurance taken out by an individual alone or with another person, outside of that individual's business, trade or profession.”
 “The risks to be covered in the policy of motor insurance, the restrictions, if any, that are different, in the policy of motor insurance that is to be renewed, to those that apply to the policy of motor insurance that is in operation, any change to the policy of motor insurance, and the premium for the policy of motor insurance to be renewed.”
 Dillon Eustace, A Guide to Non-Life Regulation in Ireland (February 2011) <http://hb.betterregulation.com/external/A%20Guide%20to%20Non-Life%20Insurance%20Regulation%20in%20Ireland.pdf> (visited 17 December 2014).
 <http://www.centralbank.ie/regulation/industry-sectors/insurance-companies/non-life-insurance-companies/Pages/default.aspx> (visited 18 December 2014).
 Attracta O’Regan Cazabon, Insurance Law in Ireland (Round Hall Sweet and Maxwell, 1999) at 172, at [12.40].
 Robert Pierse, Road Traffic Law (2nd ed., Butterworths, 1995) at 548, at [8.5].
 Motor Insurer’s Bureau of Ireland.
 O’Regan Cazabon, note 14, at 44, at [3.01].
 Doyle J in Inspector Murphy v PMPA Insurance Company  I.L.R.M 29.
 Foster B in Abbot v Howard (1832) Hayes 381 at 423.
 John Lowry, Philip Rawlings and Robert Merkin, Insurance Law: Doctrines and Principles (3rd ed., Hart Publishing, 2011) at 306.
 Shinedean Ltd. v Alldown Demolition (London) Ltd.  EWCA Civ 939.
 Rolf Nebel, “Application of Competition Law in the Insurance Industry”  5 ECLR 189.
 Vincent Power, Competition Law and Practice (Tottel, 2007) at 1246.
 Dec No 274, Falcon Holidays/Ben McArdle Ltd, 4 Feb 1994 and Notif CA/31/92E.
 <http://www.claim.ie/Road_Accident> (visited 20 December 2014).
 <http://www.consumerhelp.ie/making-a-claim> (visited 20 December 2014).
 Consumer Protection Code 2012, section 7.6 to 7.21.
 Brian H. Breuel, The Complete Idiots Guide to Buying Insurance and Annuities (Alpha, 1996).
 Ibid, section 2.3.
 Ibid, section 2.9.
 Ibid, section 2.1.
 Ibid, section 2.2.
 Competition Act 2002, section 4(1).
 Dec No 1, Nallen/O’Toole 2 April 1992, Notif CA/8/91.
 Alan WJ McCarthy and Vincent Power, Irish Competition Law: The Competition Act 2002 (Tottel, 2006) at 54.
 Établissements Consten S.à.R.L. and Grundig-Verkaufs-GmbH v Commission of the European Economic Community (56/64, 58/64)  E.C.R. 299 at 340.
 European Commission, XV Annual Report on Competition Policy 1985 (1986).
 GlaxoSmithKline v Commission (T-168/01)  E.C.R. II-2969 at -.
 Can be found in the GlaxoSmithKline appeal: GlaxoSmithKline Services Unlimited v Commission of the EC (C-501/06 P, C-513/06 P, C-515/06 P, C-519/06 P)  4 C.M.L.R. 2 at .
 Barbora Jedličková, “One among many or one above all? The role of consumers and their welfare in competition law and policy” (2012), 33(12) ECLR 574.
 See Ch. V and VI, Council Regulation 1/2003 of 16 December 2002 on the Implementation of the Rules on Competition laid down in Articles 81 and 82 of the Treaty  OJ L1/1.
 EC Commission, “Guidelines on the method of Setting Fines” pursuant to Article 23(2)(a) of Regulation No 1/2003  OJ C210/2.
 Memo of the European Commission, Antitrust: Commission welcomes General Court judgment
Upholding its Decision Against Intel, (2014) MEMO/14/416.
 Imelda Maher, “A Fine Balance, The National Courts, The European Commission and EU Competition Law” (2011) 1 DULJ 153.
 Competition Commission, "Competition Consultation", p.20; Competition Commission, "Empowering and Protecting Consumers: Consultation on Institutional Changes for Provision of Consumer Information, Education, Advocacy, and Enforcement: Competition Commission Response" (September 2011), at 2.
 OFT, "A Competition Regime for Growth: A Consultation on Options for Reform, The OFT’s Response to the Government’s Consultation" (June 2011) (OFT, Competition Consultation), at 5, [1.6].
 The Competition and Consumer Protection Act entered into force on the 31st October 2014.
 The Competition and Consumer Protection Act 2014, Chapter 3. Also the Act repeals part 4 of the Competition Act 2002, and part 2 of the Consumer Act 2007.
 Sheila Tormey, “Legislative Comment- Ireland: the Competition and Consumer Protection Act 2014” (2014) 35 ECLR 534.
 <http://www.ccpc.ie/who-we-are> (visited 29 December 2014).
 Consumer Protection Code 2012, General Principles, s2.1.
 See Robert Dowds Speech, “Government Action is needed to End Insurance Company ‘Steering’” (November 2011).
 Competition Authority Guidance Note: Preferred Repairer Arrangements in the Insurance Sector (December 2012).
 Competition Act 2002, section 4.
 Treaty for the Functioning of the European Union, Article 101.
 CA Guidance Note, note 53, Executive Summary, page 1.
 Ibid, at 5, [2.13].
 Ibid, at 9 [3.16].
 Stephen Weatherill, EU Consumer Law and Policy (Edward Elgar, 2005) at 113.
Masterarbeit, 100 Seiten
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