Irish Competition Authority Issues Guidelines On 'Preferred Arrangements' In The Insurance Sector

Author:Mr Niall Collins, Anthony Burke and Robert McDonagh
Profession:Mason Hayes & Curran

In December 2012 the Competition Authority (the "Authority") issued guidelines about the use of "preferred arrangements" in the insurance sector with a specific focus on preferred repairers in the motor and housing industries. The guidance follows an investigation by the Authority into the compatibility of such arrangements with competition law. Preferred repairer arrangements involve insurance companies entering into arrangements with service providers to repair, restore or replace a car or building when an insurance claim is made. The Authority regularly receives complaints about this, with some consumers complaining that the arrangements limit their choice and some repairers arguing that the arrangements deny them access to the market. Accordingly, in analysing the competition impact of such arrangements, the Authority considered three key issues:

the cost efficiencies achieved by insurance companies and the likelihood of lower costs being passed on to policyholders through lower premiums; the negative impact on repairers outside the arrangement, particularly the frequency of tenders for repairer contracts and the potential for foreclosure effect; and the impact on policyholders, including the use of financial incentives/disincentives regarding the use of preferred repairers and the protection offered by the Consumer Protection Code 2012 in relation to the quality of work done. Concluding that these arrangements generally result in benefits for the consumers and do not breach EU or Irish competition law, the Authority also noted that "the purpose of competition law and policy is to protect competition, not firms who have trouble competing". The Authority's research uncovered no evidence that the preferred repairer arrangements are exclusive. This means that insurers are free to enter into agreements with any repairer of their choosing and, similarly, repairers are free to compete for insurance claim-related business with any insurer. Furthermore, the Authority found...

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