Competition Authority–IVASS: joint investigation launched into competition concerns in the motor third-party liability insurance sector

The Antitrust Authority has announced the launch of a joint fact-finding investigation with IVASS into “competition concerns in the motor third-party liability insurance sector”. According to the latest Bulletin published by the competition authority, “there appear to be issues likely to have a negative impact on the efficiency and competitive dynamics of the sector”.

In particular, “with regard to risk allocation mechanisms, it is noted that, over time, their overall evolution has led to the ‘saturation’ of the bonus-malus system, with a high concentration of policyholders in the more favourable universal merit classes (CU) – and to the development of ‘internal’ merit classes defined by insurers on the basis of a complex set of risk parameters”. According to the Competition Authority, this “could affect competitive dynamics insofar as, on the one hand, it may interfere with the efficient setting of risk-commensurate premiums and, on the other hand, it may create obstacles to the mobility of demand”. Concerns have also been raised regarding insurance companies’ access “to data suitable for enabling an efficient assessment of policyholders’ risk”.

With regard to the direct compensation scheme, “it is noted that the mechanism for offsetting costs between insurance companies, based on a flat-rate system using average cost parameters, could present certain critical issues, including potential distortions to pricing policies, incentives to contain claims costs and competitive dynamics between firms”, the report states.

“Another aspect worthy of further examination,” continues the AGCM – concerns consumers’ ability to effectively compare the actual prices of motor third-party liability insurance, including through the public comparison tool Preventivass, given the widespread application of discounts – which are sometimes very substantial – by insurers or even by insurance intermediaries, in a context where commercial offers are characterised by considerable complexity, in terms, amongst other things, of additional clauses (e.g. sole driver, experienced driver, etc.) and supplementary cover (theft, fire, etc.). It seems appropriate to examine whether such commercial practices – the document states – might in fact deprive the reference premiums of the informative value that sector regulation and comparison tools assign to them, including for pro-competitive purposes.”