The motion before the House is as follows:
That Dáil Éireann calls on the Ministers for Industry and Commerce, Justice, Environment and Labour to jointly set a timetable of actions to reduce insurance costs over the next 18 months and in the light of these actions to obtain the agreement of the Insurance Companies to appropriate reductions in the insurance premia that would otherwise be charged to the public.
I want to say at the outset that I have no difficulty in accepting that motion. The view of everybody in this House must be that insurance costs are too high. They are one element of industrial costs in this country that have gone way out of line. I took it as one of my priorities, when coming in as Minister for Industry and Commerce, to attack the whole area of input costs into industry, recognising that the uncompetitive situation in which this economy had found itself was a major contributor to the loss of jobs — and very serious losses there have been in the past number of years.
I shall go through the various initiatives we have taken and try to deal with the various positions with reference to other Departments. Deputy Yates and Deputy Bruton recognise that we are only one Department — unfortunately, with the least clout in the areas in which action needs to be taken. Nevertheless, we have, on behalf of the Government, a very strong vested interest in seeing that this problem is tackled and that those costs are brought down. There is widespread agreement, not alone in this House but throughout the country, that the cost of insurance in this country is too high and has been so for far too long. It is also generally accepted that the high cost of insurance is directly related to the number and level of claims, the underwriting losses sustained by insurers and the enormous expenses which arise when the courts are involved. Let me state at the outset that I am committed to tackling the heavy cost burden which high insurance premia impose on both industrial and household budgets. The cost of insurance must be reduced. The Government in their Programme for National Recovery pointed out that Irish liability insurance rates place many Irish firms at a cost disadvantage, particularly in comparison with their UK competitors, and went on to state:
The Government will move quickly to facilitate a reduction in costs by proceeding with legislation to abolish juries in personal injuries cases, by introducing legislation to give effect to the main recommendations of the Barrington Commission of Inquiry on Safety, Health and Welfare at Work and by promoting the introduction of safety audit arrangements by insurance companies. The scope for promoting the publication of a Book of Quantum of Damages, for introducing a pre-trial procedure system and reducing the level of legal representation in the Superior Courts to help reduce legal costs will also be examined.
The reduction of high insurance costs is part and parcel of the Government's overall plan to bring about a decrease in industrial costs, and to improve the cost environment for insurance generally.
I will deal later with the specific measures which have been taken or are in the pipeline in order to bring about such reductions. However, I want to dwell for a short time on the role of the Minister for Industry and Commerce in relation to insurance and on the problems facing the insurance market in the State. It must be emphasised that the basic role of the Minister laid down both by national and Community law is one of supervision of insurers in order to ensure that they are capable of meeting their liabilities and that they are solvent and remain solvent. It is not the Minister's function to tell insurers how to run their businesses, or to interfere with their right to accept or reject risks, to dictate the terms applicable to any insurance policy, or to interfere in their right to charge realistic premiums in the light of their underwriting experience.
However, insurers do have certain duties. These duties lie in co-operating in the measures taken by the State and the Community and in the provision of their services without undue selectivity in the acceptance of risks. It is a further concern that insurance should be provided efficiently and at reasonable cost. The cost of insurance cover has increased steeply in recent years. Many of the influencing factors are undoubtedly outside the control of insurers. However, I expect insurance companies to control those factors within their ambit, so that inefficiencies in the insurance sector do not give rise to costs which have to be borne by the community as a whole and by business in the highly competitive internationally traded sectors.
Insurers are subject to very strict supervision rules and are required to maintain various categories of reserves in respect of claims which have been notified but not yet settled, claims which have arisen which are due to be notified and claims which arise in the unexpired part of the period at the financial period end of the insurance company. The insurer must then use premium income to pay overheads and to meet due payments on claims. The balance of the premium income received represents the underwriting profit or loss. In addition to these requirements, the company are also obliged to maintain solvency requirements. Insurance companies are, therefore, subject to more stringent financial requirements than is the case with commercial enterprises in general. Insurers may legitimately require certain categories which represent a higher than average level of risk to pay higher than average premiums provided there is evidence to substantiate such loadings.
Consumers are more interested, not in the supervisory aspects of insurance, except when crises arise, but in the issues of cost and availability of insurance, particularly in the motor and liability classes. I recognise that there are problems in these areas. The reasons for these difficulties are almost wholly outside my direct power of control. We should, however, be aware that increased claims consciousness and a more litigious environment have a direct adverse effect on insurance costs. The greater awareness of many citizens in claiming their full rights and entitlements to compensation under the law has meant that many more claims are made nowadays in respect of events which ten or 20 years ago would not have attracted such claims. Undoubtedly, as citizens we value these rights and we would resist efforts to curtail their exercise.
The inter-departmental committee on liability insurance, which were set up some time ago, have already reported to Government with recommendations on a list of measures which could bring about a reduction in insurance costs. I would like to outline the rationalisation measures already taken and those in train in relation to personal injury cases and the high costs associated therewith.
Action is being taken now to change our court and legal procedures. The most important measure is the abolition of juries in civil injury cases. This is a matter primarily for the Minister for Justice. The Government have already approved the amendment of the Courts Bill, 1986 to provide for: (i), the abolition of juries in personal injury cases, with effect from 31 July, 1988 and, (ii), certain pending High Court cases to be remitted where suitable to the Circuit Court after the Bill comes into effect.
With regard to juries, it is understandable that ordinary jury members when deciding the level of awards in personal injury cases, (i), do not link the level of the award to the high cost of their own insurance; (ii), have a natural sympathy for plaintiffs and tend to discount any contributory negligence; (iii), perceive insurance companies as rich and well capable of paying up and, (iv), think that they could be a plaintiff some day.
It is also likely that trial by a judge sitting alone will of itself restore the correct position regarding the burden of proof. In other words, judges are more likely than juries to stick closely to the precise law in relation to the "duty of care" which one person owes to another, to sift evidence carefully and to make realistic deductions from awards for contributory negligence. It is expected that, following the abolition of juries, judgments will revert to taking closer account of contributory negligence which, in turn, will lead to a reduction in the level of damages awarded.
The abolition of juries in personal injury cases should also lead to, (a), more consistent and predictable awards, but not lower awards in every case, which would provide a more reliable framework for insurers to estimate outstanding claims — thus reducing their costs; (b) earlier settlement of cases and more consistent and predictable out of court settlements thus facilitating better scheduling of court business and shorter trials; (c) lower legal costs and in particular much less justification for the engagement of more than one counsel in a particular case; (d) more successful challenges to spurious claims.
The abolition of juries is not a panacea but it is an important step to controlling claims costs.
The Irish Insurance Federation have given a commitment to me that, — and I quote ——
when the Courts Bill 1986 is enacted by the Dáil, IIF members will agree to introduce a special no-claim bonus for drivers who have been named on one of their existing motor insurance policies, subject to the following conditions. The driver must: — hold a full driving licence for at least one year;
——have been named on the policy for at least two years;
—not have had any claims or driving convictions.
Subject to meeting the foregoing conditions, companies would grant the person involved a special discount equivalent to at least point 1 on their normal bonus scale which in practice would represent a discount of between 10 per cent — 20 per cent of the premium which would otherwise be payable. This is a very real and immediate benefit which will be available to young drivers later this year.
In addition to this specific commitment in relation to young drivers, insurers have stated publicly that whatever general savings accrue as a result of the abolition of juries will be passed on to policyholders. Even if award levels only cease to spiral and premiums stabilise at current levels, a significant real saving for policyholders will have been achieved. Insurance industry sources have estimated that a reduction of at least 10 per cent in insurance premium levels could be the eventual outcome following the abolition of juries. These savings will be passed onto policyholders. I am not saying it here in the House but I am satisfied that that will be the eventual situation. But it is important that the Government take their actions first and then demand the appropriate reductions from the insurance industry.
The Government are also pressing ahead with plans to establish a book of quantum of damages. A judge, sitting alone, with the help of a book of quantum of damages, is much more likely to deliver consistent judgment on award levels. I know that the Minister for Justice has initiated discussions with relevant parties with a view to involving private sources in the matter as happens in the United Kingdom. I would also hope that judges, when they start deciding these cases, will consult among themselves with the aim of fostering consistency of awards.
A further measure to reduce costs is the introduction of a pre-trial procedure system in personal injury cases to shorten trial times. Provisions along these lines are contained in the proposed Court and Court Officers Bill which is currently awaiting the views of the Attorney General. This Bill contains provisions which will increase the jurisdiction of the Master of the High Court and enable him to deal with a range of matters that at present must be dealt with by judges in court. It is also proposed to confer further jurisdiction on the master by rules of court. One effect of this will be that a system of pre-trial procedures may be introduced by rules of court which would provide that, before a case could be put down for trial, the master would conduct a preliminary hearing with a view to having subsidiary issues arising in the case settled, thus shortening trials. Any streamlining of the legal system which reduces costs must be welcomed.
While welcoming the recent voluntary decision of the Bar Council to reduce the number of counsel appearing in personal injury cases, the Government have decided to go further and give the Minister for Justice the power to limit the number of counsel in such cases. The norm in personal injury cases will be one except where the court certifies that a second, or in exceptional cases and for reasons stated, a third counsel is warranted. It is to be expected that cases requiring more than one counsel would be extremely rare, as most civil injury cases turn on matters of fact rather than detailed points of law. The legal costs of hearing claims can frequently be up to 40 per cent of the award. It stands to reason that the passage of the Courts Bill, accompanied by the reduction in the number of legal personnel involved, will lead to substantial reductions in costs and will lead ultimately to lower premia overall.
As regards the question of whether the assessment of damages could be done by a tribunal on an informal basis, the possible option of introducing a damages tribunal to determine personal injuries cases, as an alternative to the present arrangements for dealing with these cases, was considered but was rejected when proposals to modify the right to jury trial were being considered by the then Government in July 1985. Constitutional difficulties could arise in connection with any proposal to remove personal injury cases from the courts. The introduction of damages tribunals has been rejected also in Britain following examination by the Law Commission, and by the Royal Commission on Civil Liability and Compensation for Personal Injury — the Pearson Commission — in 1978. A damages tribunal which was introduced in Western Australia in 1967 was subsequently disbanded.
The Government are proceeding with a set of measures designed to bring about real improvements in the whole area of insurance and any further desirable changes, including changes to the legal system will be actively considered then.
The Inter-Departmental Committee on Liability Insurance have put forward certain recommendations to the Government in relation to safety and health at work in order to give effect to the main recommendations of the Barrington Commission of Inquiry on these matters. The Minister for Labour will shortly be submitting the Safety, Health and Welfare at Work Bill to Government for approval. Again, there is a commitment in our Programme for National Recovery to introduce the necessary legislation in this area.
Consideration is also being given to expanding the proposed Safety, Health and Welfare at Work Bill to provide that safety policy statements and safety policy codes may be taken into account in establishing negligence in civil personal injuries cases as well as in criminal proceedings, subject to the advice of the Attorney General in the matter. I see the formulation of safety policy statements as bringing about some measure of predictability and objectivity in this area. It is inevitable, of course, that an employer's failure to achieve an objective stated in a safety statement may be regarded as a prima facie breach of duty. This is exactly the purpose of these safety statements as I see them, namely, to clearly set out the duties of all parties in the workplace. Insurance companies could then, if they wished, make it a condition of cover that the employer complied with his duties as set out in the safety statement. The concept would also bring about greater predictability, reinforce fault as the basis of liability and make it easier for the parties or the courts to apportion liability. As regards codes of practice which would consist of authoritative documents drawn up by experts and evaluated for approval by the proposed authority, the parliamentary draftsman is considering the issues involved in including a reference to civil personal injuries cases in the Bill.
If the general environment in which insurance companies operate can be improved, problems of cost and availability will diminish. With regard to employers and public liability insurance there is much that firms can do for themselves such as securing their premises from accidents, fire, theft, etc. Insurance companies take improved risk management by firms into account in reaching underwriting decisions on the availability of cover and its cost. Most companies employ risk control surveyors who conduct surveys on various aspects of safety control as well as providing a loss prevention service. Therefore, the onus must be placed on employers to provide adequate information to employees concerning the potential risks connected with their workplace and on the preventive measures to be observed by workers. The enactment of the Safety, Health and Welfare at Work Bill, and the provision of safety policy statements and codes, should be of considerable benefit in improving matters in this area.
I would now like to address the vexed question of motor insurance. This has been an area of public concern and controversy for a considerable length of time. The high cost of motor insurance is frequently cited as a reason why some motorists disregard their compulsory duty to insure. The cost of motor insurance is high because: (a) accident numbers are high; (b) numbers of claims are high; (c) awards are high; (d) costs of claims are high; and (e) uninsured drivers are adding substantially to each premium.
While costs remain high, premia will also remain high. Insurance companies are not providing social services. They are commercial operations which must make money to survive. They must, therefore, charge economic premia if they are to remain solvent and be able to meet their liabilities to policyholders and third parties.
It is frequently suggested to me that as a means of reducing premia, the State should establish an insurance company which could charge lower premiums and allegedly make a fortune because every insuring member of the public would be obliged to seek insurance from it. This is just not feasible. If it were possible to slash premia and make a satisfactory return on capital, some insurance company would have done it by now. A Stateowned company would have to follow the same underwriting principles as the rest of the market, that is, take in sufficient premia to pay all claims. The existing companies have not managed to achieve this in recent years.
I would point out that since 1978 the motor insurance industry has failed to meet underwriting breakeven and has had to rely on its investment income to remain buoyant. So the question of unwarranted levels of motor insurance premia does not arise and the fact remains that insurance premia are necessarily high to meet the high cost of claims.
The cost and availability of insurance for young drivers is the most frequently discussed area of motor insurance. Insurance companies vary in their definition of "young" but generally it is taken to mean under 25s. The cost of motor insurance for young drivers is higher than for other classes because of the higher risk involved. A 1982 report on motor insurance calculated that while the average gross premium per car insured for the under 25 age group was 62 per cent higher than that charged for the 30-69 age group the claims paid and outstanding were 200 per cent higher for under 25s.
At present policyholders earn a no-claims bonus as a reward for claims free driving. Young drivers tend not to be policyholders and therefore do not earn a no-claims bonus. Many young drivers have several years of claims-free driving as drivers on their parents' policy, when they first take out insurance in their own name. Many of them get no credit for this. As I have already stated, they will reap an immediate benefit once the Courts Bill is enacted.
In addition to this, a number of insurance companies have already introduced more competitive rates for young drivers, in anticipation of the more favourable environment which the enactment of the Courts Bill will bring. One company, in particular, has capped the rates for young drivers and is providing cover for £850 for young drivers in the Dublin area and £700 elsewhere. This is the maximum charge. One company has already taken the lead as a result of discussions in the Department with myself and Deputy Séamus Brennan and I would have thought that others would follow. If all of the market followed this lead there would be more competition and younger drivers would benefit enormously. Obviously some companies are waiting for the implementation of the Courts Bill.
Availability of cover is not a problem for any age group of drivers. Cover is always available, if necessary via the declined cases agreement. This agreement provides that where an individual is refused cover by five insurance companies, cover will be arranged unless it would be contrary to the public interest to do so. Standard refusal forms have been agreed by the industry which should streamline the process further. No case in recent times has been referred to the Declined Cases Committee solely on the basis of age. The vast majority of individuals who are refused cover have been convicted of some offence under the Road Traffic Acts or have had an accident. I should point out that there are those who state that insurance cover is not available when what they really mean is that cover is not available at a price they like. We would all like to pay less for motor insurance. Very few people "like" their insurance premia. But most law abiding citizens realise that they must pay insurance premia regardless of whether they like them. When we get to the stage when everyone pays their correct premium, maybe we will all like our premium better.
One idea which has been proposed on a number of occasions is funding the present system of motor insurance by means of a tax on petrol. Proponents of the petrol tax system argue that as no one could escape the insurance net problem of uninsured driving and the inequity whereby insured drivers effectively subsidise uninsured drivers would be eliminated. It would also ensure that people pay only in relation to mileage driven and road usage. While this is undoubtedly true, there would also be disadvantages. A tax on petrol would place the Government in the role of collector of insurance premia. It would be administratively complex and would be very difficult to police in Border areas. It would add considerably to the existing differential between the price of a gallon of petrol in the Republic and Northern Ireland.
The discrepancy in price would provide an incentive for people in the Border areas to purchase their petrol north of the Border and could give rise to serious large scale smuggling operations. Additional policing of the Border and possible monitoring of individual retail petrol outlets would be necessary.
The idea of a tax on petrol is put forward as being a more equitable system. This is questionable in that it does not differentiate between the careless and careful driver. Under the present system, the careful driver qualifies for a no-claims bonus. The incentive to drive carefully or indeed to finance minor damages in order to preserve a no-claims bonus would be removed under the proposed new system. The element of equity introduced by having everyone included in the insurance net would be diminished by (a) the non-differentiation in the cost of premia between the more careful and careless driver, and, (b) the extent to which cross-Border smuggling is practised.
Estimates of the number of uninsured drivers are many and varied. The most common figure in recent times is 10 per cent, or maybe less of all drivers based on a preliminary roadside survey carried out by the Garda in April 1987. We can only refer to the number of prosecutions for uninsured driving — 73,625 in 1986.
The introduction of windscreen insurance discs in July 1986 was part of a continuing campaign to reduce the incidence of uninsured driving and to improve the insurance environment generally. The disc was not seen as the solution to the problem of uninsured driving but rather as an additional enforcement measure which would operate in conjunction with Garda checks on insurance certificates. The introduction of the insurance disc is undoubtedly a help to gardaí in identifying uninsured drivers.
The Road Traffic (Amendment) Act, 1984, provided for higher penalties for offences under the road traffic code including a maximum fine of £1,000 for uninsured driving and a mandatory disqualification of one year for second or subsequent insurance offences within three years.
At present there are no minimum fines for insurance offences under the Road Traffic Acts, though the PAC report had recommended a minimum fine of £100 for uninsured driving generally and a minimum fine of £350 in the case of a deliberate offence. I am currently investigating the possibility of introducing minimum fines. The level of fines being imposed in the Dublin Metropolitan District is being monitored and it appears that the maximum fine is imposed rarely in respect of insurance offences. Indeed the current average level of fine is a fraction of the maximum level of fine.
I am anxious that everything possible should be done to deter as many people as possible from driving uninsured and I am doubtful if the current level of fines possesses the required deterrent effect. I have, therefore, taken up the matter of minimum fines with my colleagues, the Ministers for the Environment and Justice.
There are no easy solutions to the problems of high cost and the difficulties some are experiencing in obtaining insurance. It is clear that the problems are a symptom of multiplicity of diseases and that insurance costs are directly related to the level and cost of claims occurring. For example, in motor insurance a large element of the cost must be attributed to the irresponsible attitudes of many motorists to driving and to the law. In the workplace, an improved attitude to safety by both employers and employees is needed in order to reduce the number of accidents giving rise to claims. Wielding the big stick and issuing directions to insurers to take on risks they do not want, at premia they cannot afford to charge is not the answer. Putting provisions in law to make it obligatory to quote for certain classes of business will drive up the cost so that the very worst risks can be provided for and quite probably result in fewer insurers wishing to compete here.
The Government have already put in train significant measures to tackle the problems of high cost and availability of insurance and we will be pressing ahead with further measures to facilitate the elimination of these problems.
I do not expect the environment in which insurance companies operate to change overnight. However, the actions already initiated by the Government, such as the abolition of juries in personal injury cases and the rationalisation of legal representation, have already produced assurances from the industry that real reductions in premia will follow once the improved framework gets underway.
The next year will see concerted action on the part of this Government to reduce insurance costs. The Minister for Justice will be tackling the sometimes exorbitant insurance awards, by abolishing juries in insurance cases through the Courts Bill. Action will also be taken to cut the quite outlandish legal costs involved in insurance claims which can amount to as much as a quarter of the total claim award.
The Minister for Labour will be promoting radical new legislation in the area of occupational health and safety at work which will have a beneficial impact on accidents and claims.
The Minister for the Environment will be bringing forward measures in the Road Traffic (Amendment) Bill to tackle the issues of uninsured, drunken and dangerous driving. These measures will include a reduction in the blood/alcohol level and the impounding of vehicles in certain circumstances. The Minister will be participating in this debate tomorrow night and will give full details of the measures he is undertaking.
All of these measures will prove that this Government are doing their part to improve the overall environment in which insurance companies operate. I can assure the House that I will be making sure that insurance companies play their part in this process also by passing on the benefits to consumers.
I have scanned the remarks of Deputy John Bruton and have taken note of the points raised by Deputy Yates. I have an open mind on this matter. Any suggestions that are feasible, constructive and can contribute to reducing insurance costs, in whatever sector, will be considered and, if considered practical, put into operation. I can give the House an undertaking to examine every practical proposal advanced when we shall ascertain whether it is capable of implementation.
