Dáil Éireann debate -
Tuesday, 9 May 1989

Vol. 389 No. 7

Adjournment Debate. - Taxi Insurance Premiums.

Mr. McCartan

I would like, as is usual on this occasion, to thank you, a Cheann Comhairle, and your office for facilitating me in raising this, what I see as an important and urgent issue. I would also like to thank the Minister of State at the Department of Industry and Commerce, a Minister who has dealt very comprehensively in the last couple of months with the issue of insurance. I am pleased he is here to listen to the case I have to make and I hope that, having raised a number of matters with him, he will indicate some hope because I believe hope and action is needed in this area.

This is a complex issue whereby on the one hand people who have been in employment have been faced with massive increases in the premia levied on them by the insurance company involved while on the other hand, there is a need for controls on the numbers of people driving taxis and employed in that area. I understand that the PMPA company, in considering and reviewing the overall position of premium to be levied on the taxi industry for the current year, employed the services of an investigator to look into the area of losses and the present problem was highlighted. On the one hand an owner driver was being levied a premium of, on average, £1,500 while cars driven by two or three drivers would be levied with the same amount of premium. In other words, these cars would be on the road for 24 hours a day as opposed to the average of between seven and eight hours for an owner driven vehicle. I accept this is an issue that had to be addressed but my basic point is that the rather drastic action taken by the insurance company was excessive and has had a very profound impact to the extent, I am reliably advised by the taxi federation, that upwards of 500 taxi drivers have been put off the road with a consequent increase in the other problems that arise from their unemployment.

Basically what has happened is that the insurance industry introduced a rule this year that the owner driver of the taxi pays the full premium and that a second or subsequent driver pays exactly the same for their driving of the vehicle. The obvious onus rests on the second or subsequent driver — the "cosy" driver as he is called — to raise this money. That was not the practice heretofore. Previously a single premium was paid, usually by the owner of the car, and the "cosy" driver would then contribute during the year on a weekly basis to pay off the share of that premium.

The position has to be contrasted against some basic facts about taxi drivers that are often not accepted or certainly not stated often enough. In a recent survey, giving the figures relating to taxi drivers in Dublin, it was established that out of 1,835 drivers, 1,100 had a clear record of driving, driving without claim, for five years and upwards. In other words, they were carrying the maximum bonus of 60 per cent available to them from the insurance company. That in itself is a remarkable record. It is estimated that in the past five years there have been fewer than ten serious claims involving taxi drivers. Therefore, the facts regarding the overall performance of taxi drivers are somewhat distorted. In living memory there has been only one fatal accident involving a taxi driver in Dublin and that was when a taxi collided with a stolen motor car, leading, regretfully, to the death of a passenger in the car.

Those are the facts relating to what I believe is a very laudable record of safety among taxi drivers in the city. Contrast that against what has been the impact of the decision of the insurance company in a single fell swoop to introduce a practice that amounts to, for many of the drivers, upwards of a doubling and, in some instances, a trebling of the premium to be levied on any one motor car. The consequent loss, as I have indicated, of approximately 500 jobs indicates that the action on the part of the insurance company was excessive and must be a matter of concern to any Minister of Government involved in this area. The Minister of State at the Department of Industry and Commerce has indicated that the level of premia is something of active interest to him in his portfolio so I hope he will take on board this question of the scale of premia to be levied on taxi drivers in the city.

The loading system employed by the insurance company involved is also something that is worthy of investigation By way of an example, a taxi driver to whom I spoke today advised me that he has been driving for 27 years with a clear record of no claim and has earned the maximum bonus available to him of 60 per cent reduction on the basic premium. Should he have an accident involving a claim, no matter how small, he will lose that entire bonus cover and revert to a zero bonus rating. Subsequent on that, the maximum bonus he can work back to, irrespective of whether he achieves another 27 years of clear record, would be 30 per cent.

The reality of the system currently in operation is that another driver of that car carries exactly the equivalent of the premium of the owner driver. A driver coming perhaps out of retirement from some other work and being lucky enough to get the means to start driving a taxi will carry the equivalent of the premium of the first driver, without regard to the record of the "cosy" driver. He may be a person of eminent record with no claim or no blemish whatsoever, a supreme, competent driver, but because he is unfortunate to be associated with a driver owner who has had the misfortune of losing his bonus, he must carry a penalty. If there is a third driver exactly the same applies.

This is a pressing problem, even more so at a time when many taxi drivers are now trying to get members of their families into the industry. There is a major restriction on licences being issued. I do not recall any licences being issued in Dublin in recent times. The only avenue available to a taxi driver to allow his son or daughter to work in this job is through co-driving. If a taxi driver wants to bring his son or daughter in, he must be in a position to pay double or sometimes treble the premium he would have to pay for his motor car. The practice prior to this was that insurance companies charged £12 on top of the first premium for open driving.

I accept that that was not an entirely fair system, and that has been highlighted by the taxi federation and the insurance company but what has now taken place is far too drastic. No one envisaged that it would have had the impact it has had on employment in the industry, as has happened in Dublin. There is an additional 50 per cent loading on the premium for young adults under the age of 25 years. A father wanting to introduce into the taxi business a son who has left school but who cannot find other work must pay 100 per cent extra on his premium plus 50 per cent if the son is under 25 years. That is an indefensible system.

I hope the Minister will look at the points I raise and will report back to me or to the taxi federation as to what can be done to put matters right. It is a cause of major concern to the taxi federation that there is only one insurance company in the city prepared to deal in taxi premiums. It is unsatisfactory that there is no competition. The PMPA have an effective monopoly with the result that they can take hard decisions without fear of losing clients to a competitor. That monopoly must come to an end. If other insurance companies provide motor insurance they should be prepared to provide for taxi drivers. The record of taxi drivers indicates that they do not present a serious risk to any company. The Minister should do his best to involve more insurance companies in providing cover for taxi drivers.

As long as the PMPA are primarily the company involved with taxi drivers — and they will continue to be for the remainder of this year — the Minister should look at the figures upon which the PMPA seek to justify the current increases. Because the PMPA have a monopoly they have seized on a representation made to them to deal with multiple drivers of single cars, to introduce an exorbitant and indefensible scale of increase of the premiums. I am sure they did not have any appreciation of the serious impact that would have down the line in terms of job losses. The Minister should challenge the PMPA on the matter. Their figures do not justify the increases. They have merely seized a good market opportunity when defences were down. The Minister should get the company to realise that they must rejig the rebates and assist drivers to get back behind the wheel.

Will the Minister also look at the question of loading procedures? I have given an instance of what happens in Dublin where a father wants to introduce a young son into the business. The huge loading there cannot be justified on the figures, and the Minister should look at this.

A lot of taxi drivers looking for insurance cover who are not entertained by any company and who seek recourse through the normal channels of the Minister's office invariably find that the response in the "forced" quote given at the instigation of the Minister is completely unrealistic. They are quoting premium figures of treble and sometimes four times the average insurance premium cover available to taxi drivers in this city. That is punitive and unfair.

Those are the issues that have been raised as a result of the recent action by the PMPA because of the serious impact on employment in this service industry in the city. I call on the Minister to investigate the issues I have raised. I do not expect that at such short notice the Minister has all or any of the answers I am looking for tonight, but I invite him to respond in whatever way he can this evening and to respond later, after investigating the issues, to me or to the federation. If necessary perhaps the Minister would agree to meet the taxi federation to discuss this problem so that we can relieve the hardship that has been caused by this sudden unexpected decision.

Minister of State at the Department of Industry and Commerce (Mr. S. Brennan)

I thank Deputy McCartan for raising this issue. I appreciate the difficulties and understand the frustrations of taxi drivers generally with regard to costs, particularly insurance costs. I will give very serious consideration to all the facts and figures which Deputy McCartan has given the House this evening. I will look carefully at the facts and at the suggestions the Deputy has made this evening.

I am not aware of any possible loss of 500 jobs in the taxi business as a result of increased insurance premiums. I would certainly value further data on that from the federation. I understand that the number of licences for public service vehicles including taxis is around the 6,000 mark and applications for such licences are on the increase. Indeed such is the demand to get into the taxi business that Dublin Corporation have limited the number of taxi plates to around 1,835 since 1979 and the going rate for such plates is now around £30,000. Of course, a large number of taxis would have two or more drivers.

The problems of high insurance costs is directly related to the high number and level of claims. Over the past number of years insures have suffered large underwriting losses on their motor accounts. In 1987, the latest year for which full figures are available, insurance companies suffered underwriting losses of £32 million on their motor business. Faced with losses of this magnitude insurance companies had little option but to increase their premiums or exercise more selectivity in the type of risk undertaken. I understand that among the main classes of motor vehicles, taxis have the highest claims frequency rate — in fact the insurance companies indicate to me that taxis are almost four times more likely to have an accident than are private cars. I have heard what the Deputy has said this evening and I will see where the discrepancies arise in this information.

The PMPA which are the largest insurers of taxis, have 1,817 policy holders on their books, and in 1987 incurred a loss ratio of 150 per cent on these accounts. For every £100 taken in in premiums £150 is paid out in claims. As a consequence they have had no option but to increase rates for taxi drivers and in particular for the named drivers on policies. The extra loading on additional drivers which will affect about 700 policy holders, would not appear unreasonable given that a second or third taxi driver means that the vehicle is on the road for longer periods and therefore exposed to much greater risks.

While I appreciate that the company we are talking about has the lion's share of this business, there is no reason other insurance companies would not complete for the business. Unfortunately, the reality is that other companies do not seem to regard it as lucrative business or lucrative enough to go after. As premiums go up and competition increases, other companies should be able to look at that marketplace.

As a result of the Deputy's suggestions, I will take the specific step of encouraging other companies to look at this marketplace and see whether they find it commercially attractive to provide insurance. We can be sure of one thing. If there was money to be made in insuring taxis, the other companies would not leave it to one company, because competition in the insurance business is quite severe.

I can certainly ask the company we are talking about to consider allowing each driver to be a policyholder independently and in that way earn an independent bonus. I am aware that the company may not find that idea attractive for all sorts of reasons but I will certainly draw it to their attention as a possible solution for the taxi drivers.

My primary responsibility in the area of insurance is to ensure that companies maintain their solvency and that they maintain their statutory reserves. I have to respect the right of insurance companies to accept or reject risks in the light of their underwriting experience. I simply cannot compel the PMPA, or any other insurer, to make patently uneconomic decisions in respect of any class of business. I am also very conscious of the dangers involved if an insurer were to reduce its rates below a financially viable level and I am certainly not advocating that. We have had that experience in the past.

While I understand and sympathise with the frustration with the recent premium increases for taxis, I regret to say that the figures which I have outlined above in respect of claims would appear prima facie in any case to justify these increases. However, I will look at the matter again.

Greater road safety, in particular by taxi drivers themselves, would help considerably, but this goes of all drivers on the road and not just taxi drivers. I think it is fair to say that most people are preoccupied with insurance cost, availability and coverage, particularly in the motor classes. There is widespread agreement that the cost of motor insurance in this country has been too high for far too long. It is also generally accepted that the high cost of motor insurance is directly related to the number and level of claims, the underwriting losses sustained by insurance companies and the enormous expenses which arise in the claims process, particularly when the courts are involved.

The Government in their Programme for National Recovery recognised that motor insurance rates were too high and undertook to move quickly to facilitate a reduction in insurance costs. The House will be aware that the Government have, over the past two years, tackled this area fairly vigorously, and with some sense of urgency. In a general sense there is a lot of work to be done, but we have achieved some success.

The most important commitment given by Government was to abolish the use of civil jurys in personal injury and fatal accident cases in the High Court. The Courts Act, 1988, came into force on 1 August 1988. Jury trials in personal injury and fatal accident cases are no longer available to parties in litigation from that date. The object of this change is to bring greater consistency and predictability into the awards of damages in these cases and to enable a much greater proportion of cases to be settled at an earlier stage in legal proceedings.

The insurance industry, and many others, have for long cited the availability of jury trial as a principal cause of the high cost of motor and liability insurance in this country. The Government have now delivered on their commitment to do away with the jury system. There is, therefore, a clear onus on the insurance industry to translate the benefits arising from that important change into lower insurance premiums. I have already said to the industry, and I repeat it now, that I expect any reductions brought about by this change will be passed on to the consumer. I am currently undertaking a study of how the system has been working since 1 August 1988 and I hope to be able to make an announcement about that shortly because I am very anxious, as I am sure the House is, to see what effect the non-jury system has had on insurance.

The cost reduction measures already taken will have a beneficial effect on motor insurance costs. I should remind the House that up until the end of 1988, the consumer price index showed that in general insurance costs across the board were down 6 per cent, and I understand from the figures that will be announced shortly that in the first few months of this year there has been a reduction also in general insurance rates, after years of increases.

Another matter that has been linked with the jury issue is the concern about high legal costs. Until recently, virtually every personal injury case in the High Court — no matter how straightforward — involved at least eight lawyers, including three counsel on each side. That was regarded, quite properly, as an extravagance and there is a commitment in the Programme for National Recovery to reduce legal representation in superior court cases. In line with that commitment, the Government decided to include a provision in the Courts Act, 1988, that empowers the Minister for Justice to regulate the number of counsel whose fees can be recovered by a successful plaintiff in a personal injury case.

Independently of possible statutory intervention — though some would say because of it — the Bar Council announced it would abandon the long standing three counsel practice in personal injury cases when jury trial ceased. In addition, in response to my call for rationalisation of legal representation levels, an agreement was reached recently between the Insurance Industry Federation and the Bar Council which provides that only one counsel will appear in personal injury cases up to £25,000 and two in cases over £25,000. I am also conducting a study to see how that change is working out. I am very anxious to ensure that the spirit as well as the letter of the law is kept in practice on a day to day basis. I will have some further information on that matter for interested parties.

The Minister for Justice is looking at the idea of a Book of Quantum of Damages. Such a book is published in Britain, and used there as a guide for the insurance industry, the legal profession and the Judiciary in settling and deciding cases. Another development worth mentioning is a recent initiative by the Irish Insurance Federation in arranging that member companies will maintain a record of major categories of injury, and will collate data on award settlements, and circulate the results to members and to my Department. Such data will complement data on court awards in injury cases and help to provide an overall view of the quantum of damages in personal injury cases.

Another commitment is the question of introducing a system of pre-trial procedures in the High Court to enable subsidiary issues to be disposed of by agreement between the parties before a trial. The aim would be to limit the issues going to court to those that remain in dispute between the parties. This would speed up matters considerably. As well as reducing legal and expert witnesses' costs, such a facility could have a major influence on personal injury cases by providing new procedural machinery to advance the prospects of settlement in cases that go all the way to trial at present. I understand that the Minister for Justice hopes to put proposals to the Dáil shortly in the context of a court and court officers Bill, which is at an advanced stage of preparation in his Department, to facilitate the introduction of a system of pre-trial procedures in the High Court.

I understand the Minister for the Environment is proposing to introduce legislation to strengthen the road traffic code and to deal more effectively with certain aspects of uninsured driving and other offences. The measures proposed could include the impounding of motor vehicles to deal with uninsured drivers.

I would hope for rapid progress on most, if not all these areas. For my part, I will do everything possible to keep up the momentum. We have made considerable progress in the past two years in the jury, legal representation and competition areas to get insurance costs down. However, there is still a lot of work to be done. I am constantly reminding the insurance industry of the need to reorganise and rationalise themselves in the context of 1992 so that they can meet international competition. One thing is certain, this industry will face substantial competition in the years ahead, both from within this country and from outside. This will have a corresponding effect on insurance rates in the years ahead. There is a lot of work to be done.

Again I would like to say to Deputy McCartan that I value the points he has raised. I have taken very careful note of them, particularly of the facts and figures he has given, and following his request, I will be quite happy to meet with the Taxi Federation and discuss the matter with them as soon as is practicable. I understand their frustration about insurance rates because many motorists feel the same way. However, we have been making substantial progress in this area and I would not want undue levies to be imposed on taxi drivers, and we will do everything possible to assist them. Obviously, I cannot turn back the economic tide and I have to take account of the loss ratio.

The Dáil adjourned at 10.30 p.m. until 10.30 a.m. on Wednesday, 10 May 1989.