Vol. 395 No. 8
6 Mr. Sherlock asked the Minister for Industry and Commerce if his attention has been drawn to the recent survey carried out by the Consumer Association of Ireland which showed huge variations between the prices quoted for motor insurance by different companies; if he intends to take any measures to ensure that insurance companies are not allowed to impose excessive premia; and if he will make a statement on the matter.
My attention has been drawn to the survey mentioned by the Deputy which was carried out by the Consumers' Association in June 1989 and published in its Consumer Choice Magazine in October 1989. I would like to stress that this survey was based on a hypothetical risk and the methodology used calls into question the results of the survey.
The Consumers' Association itself admits that it was decided to ensure that the brokers and the insurance companies contacted were not given the same details of information as to the risk for which quotas were sought. In effect the brokers were not then seeking quotas on a basis that could result in fair comparison. The results of this survey must, therefore, be seriously questioned.
In addition the risk for which quotes were sought in the 1989 survey was not the same as the risk on which quotes were based in an earlier survey in October 1988 by the Consumers' Association. Valid conclusions cannot, therefore, be drawn from the results of the two surveys.
I must also point out that the 1989 survey covered only one category of motor risk and did not represent an overall survey of motor insurance premia.
At the time of its publication my Department rejected the 1989 survey. I would add that clearly the results of this survey do not, for the reasons I have already mentioned, give a valid picture of the trends in motor insurance premia or of the range of rates available in the market.
The Deputy will appreciate that, as the insurance supervisory authority, my primary responsibility is to ensure that companies meet their statutory reserves and solvency requirements and, as such, I must respect the right of insurers to accept or reject risks in the light of their underwriting experience. No obligation can be placed by me on an insurer to quote in respect of a particular risk or to quote at any particular premium.
The cost of motor insurance is dependent on the frequency and level of claims, the level of awards for personal injuries and the general underwriting experience of insurance companies. In recent years competition has also increasingly become a factor. Since price control was removed by the Government in January 1986 motor insurers are required only to notify me in advance of any alteration to their rates. However, I am aware that the underwriters' losses in motor insurance have been increasing. Unless there is an upturn in the underwriting experience, one cannot expect overall improvements in rates for motor insurance.
The Minister spent a lot of time when replying in casting a slight on the credibility of the study. Consumers' Choice Magazine and the Consumer's Association of Ireland have a proven track record which can be examined and the studies carried out by them are reliable. Does the fact not remain that the crusade to abolish juries and the consequent benefit to the consumer have turned out to be a con trick on the consumer and the motorists? Is it not absurd that that survey could find, for example, that the average safe, experienced driver could find him or herself being charged anything between £219 to £496 for third party cover or from £306 to £371 for third party, fire and theft?
I have to dissuade the Deputy from making a speech. This is Question Time. We want brief relevant supplementaries, please.
With all due respect, there was not much brief in the previous 15 and a half minutes that I have been in the House. I am querying——
The Deputy may not cast reflections upon the Chair. The Chair did his best in respect to questions for priority. I am not responsible for long contributions at Question Time in the House.
I can assure you, a Cheann Comhairle, I am not. I am asking the Minister whether it is not absurd that the kind of discrepancy I have mentioned in the price of insurance could obtain for the consumer and the motorist in this country, notwithstanding what they were led to believe by this Government.
The Deputy has made his point.
I do not think it is absurd for the simple reason that apparently different facts were put to different brokers and companies in the course of the survey and therefore one is not comparing like with like. I would find it far more ominous if, as happened in a different survey, a number of companies were quoting the same figure. The fact that they are all different, and some of them quite significantly different, indicates that they are competing for business rather than engaging in any cartel type arrangement and that is a good thing.
Specifically, what about the question of the amount of increases, a major company, for example, increasing premiums by 13.1 per cent following on an earlier increase some months earlier of 8 per cent? Surely that is excessive, and does the Minister propose to take any action to control it?
I dealt with that in relation to Questions Nos. 1 and 5 at some considerable length and I do not think it would be in the interests of the House for me to repeat all that again.
Would the Minister agree that it is not good enough for him to say that he has no role to play in forcing an insurer to accept or reject a risk? Would he not agree that the law states that everybody who drives a motor vehicle must carry insurance and that therefore there is an obligation on him, as Minister, to see to it that insurance cover is available to those who wish to have it in accordance with the law? Would he not further agree that we hear consistently about underwriting losses? What mention is there of investment profits arising from the vast sums of money that are collected through motor premiums? Would the Minister not agree that some of that investment profit must be used to offset the underwriting losses?
In regard to my obligation to ensure that people get cover where cover is compulsory, that is recognised in the fact that there is in existence, by arrangement between the Minister and the industry, what is called a declined cases committee to which people who have been unable to get cover have their applications referred and are quoted cover by a company on behalf of the committee. The quotation may not always be to their liking but at least they are quoted cover.
On the question of investment profits, I have spoken only about underwriting losses. The investment surpluses would be significant, but it is true to say that in the case of virtually every company in recent years investment profits that arise out of the motor portfolio are less, and in many cases significantly less, than their underwriting losses and, therefore, a significant net loss is accruing to the companies concerned.
