I propose to take Questions Nos. 1 and 5 together.
The policy issues which arise in the motor insurance area include the paramount need to maintain the solvency of motor insurers so that the cover which the motorist receives continues to be available. In recent years competition between insurers has increased and is expected to grow and hence the policy requirement to encourage the development of a healthy competitive market both in relation to insurers and intermediaries. The Government recognise also the importance of improving the environment for motor insurance.
My Department keep these fundamental policy issues under continuous review in the light of developments in the Irish market and also in relation to developments in the European Community. The conclusions drawn in the most recent formal report of inquiry into motor insurance continue to assist in this ongoing work. I refer here to the Report of Inquiry into the Costs and Methods of Providing Motor Insurance, which was commissioned in November 1981 and submitted by the Prices Advisory Committee (Motor Insurance) to the then insurance supervisory authority, the Minister for Trade, Commerce and Tourism, in December 1982.
I would draw the attention of the House to the enactment of the Insurance Act, 1989, as recently as last March. This legislation was a response to the need to strengthen the insurance supervisory mechanism and to provide a framework for the regulation of insurance intermediaries in the interests of insurance consumers including motorists. I would also point out that a new Competition Bill, which is at an advanced stage of preparation in my Department, will cover, inter alia, the area of motor insurance.
A number of other initiatives have been taken which were designated to improve the environment for motor insurance and further actions are being considered. I will return to these later.
My primary and, indeed, statutory duty as the insurance supervisory authority is to ensure that insurance companies maintain their statutory reserve and solvency requirements. I must, therefore, respect the right of motor insurers to make their own underwriting decisions, including the setting of motor insurance premia, in the light of their individual underwriting experience.
Since price control was abandoned by the then Government in January 1986, motor insurers are required only to notify my Department of alternations in their rates and it is by this means that my Department keep themselves abreast of changes in the market place.
The price of motor insurance in this country, as indeed in any other market, is substantially related to the frequency and level of claims. Over the past number of years insurers have suffered large underwriting losses in their motor accounts. In 1987 insurers sustained underwriting losses of £32 million on motor business and these losses have increased to £48 million in 1988. Losses for 1989 are expected to be even higher. Consequently, individual insurers have had to increase premiums and to exercise selectivity in the type of risk undertaken. Motor underwriters base their premia on their own underwriting experience and on their individual marketing strategies. The price and conditions of cover can, therefore, vary from company to company and from risk to risk.
The insurance industry itself has recently stressed the effect that current claims experience, in terms of increased numbers of claims and the increased cost of these claims, is having on motor insurance premia. As in any market, one cannot expect overall improvements in rates for motor insurance when the underwriting experience is worsening. Until the claims experience in Ireland mirrors that obtaining in other EC countries there will be divergences between motor insurance premia in Ireland and those applying in other European countries.
An international survey published in 1987 showed that the incidence of road accidents in Ireland was the highest among the 19 countries surveyed and there is no evidence of a marked reduction in the number of accidents on Irish roads since then. Recent Garda statistics show that the number of road accidents involving personal injury in the period January - September, 1989 increased by about 5 per cent over the same period in 1988.
The Courts Act, 1988, was enacted in an effort to develop a greater degree of consistency and predictability in the awards made in personal injury actions. This objective, if achieved, should benefit both the injured parties and the motorists whose insurance premia pay for these awards, in terms of speedier and less expensive settlement of personal injury claims.
I have been in consultation with the Minister for Justice about speculation that award levels may have risen since removal of the right to trial by jury in personal injury cases. However, given the limited number of cases to date and also because some 40 per cent of these cases have been appealed to the Supreme Court, it is too early to draw final conclusions as to the sustained impact that judges sitting alone will have on the level of awards, particularly in terms of consistency and predictability. However, I have to say that preliminary indications are not as positive as one would have hoped.
The insurance industry expected that legal costs would fall as a result of the abolition of the three counsel rule. Unhappily, there is no evidence at all that legal costs have fallen as a result. Indeed, the contrary may well be the case. The insurance industry itself has estimated that legal costs contribute some 20 per cent to their overall costs. I should point out, however, that, in addition to barristers fees, these legal costs include solicitors fees and the fees and expenses charged by expert witnesses such as doctors and engineers.
By means of ongoing consultation and the exchange of relevant data between my Department, the Department of Justice and the insurance industry the monitoring of the impact of initiatives such as the Courts Act, 1988, and the abolition of the three counsel rule will continue.
I am satisfied that ample statistical and other evidence is, or will be, available to monitor the movement in insurance premia and the costs which give rise to these movements. An inquiry at this time would do nothing to resolve the basic difficulties of the increased numbers of claims and the increased cost of those claims.
Under the Programme for National Recovery the Government's objective is to improve the environment for insurance generally. As I have said, however, it is too early to judge what long term effect initiatives such as the Courts Act, 1988, and any orders which may be made under it will have on the price of motor insurance. Notwithstanding this, further action is being considered in the context of improving the environment for insurance. I am consulting with my colleagues, the Ministers for Justice and Environment respectively, who are considering further initiatives regarding the operation of the courts and the enforcement of the road traffic legislation.
However, Government action of itself will not reduce or stabilise motor insurance costs. Consumers must play their part by increased awareness of the need for safety. Insurers must also ensure that they operate efficiently and effectively and develop policies and strategies to meet the requirements of the market and the changes and challenges in the environment in which they carry on business.
