Vol. 416 No. 8
7 Mr. J. Bruton asked the Minister for Industry and Commerce if he will outline the trend in the level of the average over insurance premia for drivers under the age of 25 over the last five years; and if the trend of increase in premia for under 25 year olds has risen faster or slower than most other insurance premia in general.
10 Mr. Boylan asked the Minister for Industry and Commerce if he will outline the trend in the level of the average over insurance premia for drivers under the age of 25 over the last five years; and if the trend of increase in premia for under 25 year olds has risen faster or slower than most other insurance premia in general.
32 Mr. Enright asked the Minister for Industry and Commerce if he has satisfied himself that Article 92 of the EC Treaty governing state aid is sufficiently far reaching, in its present form, to prevent richer EC member states unduly favouring enterprises in their own jurisdiction to the disadvantage of enterprises in poorer EC member states.
49 Mr. D'Arcy asked the Minister for Industry and Commerce if he will outline the trend in the level of the average over insurance premia for drivers under the age of 25 over the last five years; and if the trend of increase in premia for under 25 year olds has risen faster or slower than most other insurance premia in general.
58 Mr. McGinley asked the Minister for Industry and Commerce if he will outline the trend in the level of the average over insurance premia for drivers under the age of 25 over the last five years; and if the trend of increase in premia for under 25 year olds has risen faster or slower than most other insurance premia in general.
69 Mr. O'Brien asked the Minister for Industry and Commerce if he will outline the trend in the level of the average over insurance premia for drivers under the age of 25 over the last five years; and if the trend of increase in premia for under 25 year olds has risen faster or slower than most other insurance premia in general.
86 Proinsias De Rossa asked the Minister for Industry and Commerce if he will investigate, (1) the threat to the maintenance of the rider policy for motor-cyclists, (2) the exorbitant cost of insurance which is to be further compounded by a 20 per cent increase from 1 March 1992 and which costs up to 500 per cent more in this State than in England, and (3) the monopoly situation which has developed here in relation to motor-cycle insurance and the complete lack of development of different types of policies compared with our European counterparts; and if he will make a statement on the matter.
87 Mr. Doyle asked the Minister for Industry and Commerce if he will investigate the cost of motor cycle insurance in this country as compared with other EC countries; and if he will take measures to reduce the prohibitive cost of motor cycle insurance in this country.
89 Mr. Durkan asked the Minister for Industry and Commerce if he will outline the number of insurance/assurance companies currently operating in this country but registered or in any way associated with companies from overseas or in Northern Ireland; the number of these companies currently offering car cover overseas or in Northern Ireland; the number offering motor cover in this country; and if he will make a statement on the matter.
90 Mr. Durkan asked the Minister for Industry and Commerce if he will outline the number of insurance companies currently quoting for, (a) young drivers, (b) other drivers and (c) motor cyclists; if he has satisfied himself with this situation; if he will further outline his plans, if any, to improve these matters and particularly the likely nett benefits to vehicle owners; and if he will make a statement on the matter.
I propose to take Questions Nos. 7, 10, 32, 49, 58, 69, 86, 87, 89 and 90 together.
Data is not readily available to my Department which would enable the detail of the information which the Deputies seek in relation to young drivers to be provided. However, on the basis of available date the overall average price of motor insurance in 1990 prices (i.e. earned premium income, as shown in the annual returns by motor insurers, divided by the number of vehicles registered for road tax) was £398 in 1986, £397 in 1987, £392 in 1988, £373 in 1989 and £389 in 1990.
Statistical evidence has shown that young drivers are much more likely to be involved in accidents and therefore to cause more claims.
I understand from the insurance industry that while young policyholders account for only 15 per cent of the total number of policies issued by insurers, young drivers account for 36 per cent of all claims and that the average cost of claims caused by young drivers is over 40 per cent higher than that of more mature drivers. The cost of these claims can only be met by insurers if an appropriate premium is forthcoming to cover the risk involved. I would point out that the recently reconstituted Motor Insurance Advisory Board (MIAB) are in the process of compiling their annual report, which I understand will concentrate on as assessment of the loadings applied by motor insurers to young drivers.
In any market the price of insurance, including motor-cycle insurance, is substantially determined by the cost of claims. I am aware that one insurance company has the predominant share of the motor-cycle insurance market. However, this position has developed over the years not because the company sought a monopoly position but rather because it is the only company which is prepared to do a large volume of motor-cycle insurance business.
The company has informed me that customers who currently have a rider scheme policy will be offered renewal for their rider policy. However, this scheme is being withdrawn for new business and for those who choose not to renew their current rider policy. In future, the motor insurance certificate will bear the registration number of the vehicle, as with private car insurance. By specifying the vehicle on the insurance certificate, the gardaí can more readily identify those who are not insured and are therefore driving at the expense of those who are. Third party motor insurance is the only form of insurance which is compulsory under the Road Traffic Acts and and queries in this regard should be addressed to the Minister for the Environment.
The recent publication of the Coopers and Lybrand Review of Motor Insurance Costs in Ireland and the United Kingdom confirms what I have been saying for the past number of years regarding the level of motor insurance costs in Ireland. In particular, I am glad to see that the review reiterates the need to examine the level of awards for pain and suffering in this country and also the present mechanisms for resolving personal injury claims. It also draws attention to the level of professional (including legal) fees in Ireland and the late settlement of some claims. The report concludes that personal injury claims costs in Ireland are over four times higher than in the United Kingdom and that the proportion of motor insurance claims which include personal injury compensation in this country is five times higher than that in the neighbouring jurisdiction.
The important question is — why is this so? Are Irish people more susceptible to injury in motor accidents and when injured do Irish people suffer more serious injuries than their counterparts in the neighbouring jurisdiction? Are our compensation levels too high and are our mechanisms for the resolution of personal injury claims too complex and too costly in terms of the level of awards for pain and suffering and the legal and other expenses associated with the settlement of such claims?
We need as a society to seriously examine these fundamental questions. We cannot continue to claim more often for personal injury as a result of accidents, to accept compensation levels far higher than in other countries and at the same time hold a view that our motor insurance premiums should be on a par with those of other countries. Unless and until the claims experience, including the claims frequency and levels of compensation paid to victims of road accidents, in Ireland matches that obtaining in other European countries there will be divergences between motor insurance premia in Ireland and those applying in other countries.
I would add that in the context of the inter ministerial group on motor insurance (IMG), which I chaired, the Minister for Justice agreed that his Department would carry out a review of the levels of compensation awarded by the courts in the State in personal injury cases; and in particular the amounts awarded as general damages for pain and suffering and loss of amenities of life in the light of: (1) A 1991 survey by Davies Arnold Cooper which suggests that personal injury compensation levels in Ireland are substantially higher than in other EC Member States, and, (2) the report, now published by Coopers and Lybrand on personal injury compensation levels in Ireland compared with the United Kingdom.
There are at present 30 companies authorised to transact life assurance business and 60 companies authorised to transact non-life insurance business in this country of which 33 non-life insurance companies are authorised to transact motor insurance, including motor cycle insurance and insurance for young drivers. The practice whereby insurers refuse to offer a quotation for certain types of risks is a matter for each insurer to decide. It is not my function to tell insurers how to run their business or to interfere in their rights to accept or reject risks, or to dictate the terms applicable to any insurance policy, or to interfere in their rights to charge realistic premiums in the light of their underwriting experience. In any event cover is available through the Declined Cases Agreement.
The Declined Cases Committee, who were established under the Declined Cases Agreement, deal with cases of difficulty in obtaining motor insurance, including motor cycle insurance and insurance for young drivers. This committee is composed of representatives of the authorised motor insurance companies and examine cases which have been declined by five or more insurance companies and nominates one of the companies to quote for the risk involved. Similar agreements dealing with unavailability of cover for certain motor risks exists in the other member states of the Community.
At the moment Irish insurance undertakings must be authorised by me to carry on insurance business in Ireland and whether branch or head office are subject to Irish supervision and regulatory control.
Under current EC legislation, no non-life insurer authorised in Ireland can transact motor insurance into another member state without setting up a branch or head office there. Similarly, foreign insurers cannot transact motor insurance business in Ireland, unless they are already established here. I am presently preparing legislation to give effect to the EC Motor Insurance (Services) Directive, which is due to be implemented into law by the end of May 1992, and comes into force at the end of November 1992. This directive will allow EC insurance companies to offer motor insurance cover, on a services basis without being established, in a uniform manner throughout the EC subject to certain criteria, depending on the size of the risk undertaken.
While the opening-up of the Community market may intensify competitiion on price, cover and quality of service, it should be noted that there is already a substantial foreign presence in the Irish motor insurance market. Over 70 per cent of non-life insurance undertakings operating in Ireland are foreign owned. Increased competition may not necessarily lead to a reduction in insurance costs in Ireland. Prudent insurers, indigenous, EC established or Community services must set their premium rates to match the compensation payout. The compensation levels existing in each member state should determine the premium rates charged by both established and services insurers.
In relation to the inter-ministerial group on motor insurance, whose activities have been well documented in this House, I would refer the Deputy to the contributions which both the Minister for the Environment and I made to a debate here on 2 and 3 July 1991. The recommendations of that group are in the course of being implemented, and are aimed at assisting in the improvement of the environment for insurance for drivers as a whole, including motor cyclists and young drivers. Deputies will appreciate that questions about road traffic legislation and legislation in relation to the courts are properly addressed to the Minister for the Environment and the Minister for Justice.
I would add that Government action of itself will not reduce or stabilise insurance costs before the end of 1992 or thereafter unless the general public, including motorists of all kinds, play their part by increased awareness of the need for road safety.
I must once again point out that as the insurance supervisory authority I have a responsibility to ensure that insurance companies meet their statutory solvency and reserving requirements. The setting of insurance rates by insurance companies are underwriting matters which are the preserve of insurers to decide in the light of their particular circumstances and assessment of the market and in which I have no function.
I am calling Deputy Boylan whose Question No. 10 refers.
I think the Minister for a very detailed reply to a very important question for young people in this country. Does the Minister accept that a car for a young person in Ireland is not a luxury but rather a necessity to get to his place of employment because of the lack of public transport? Is the Minister aware also that in a report circulated this morning by Coopers and Lybrand for the Irish Insurance Federation the survey on premiums indicate that the differential——
Sorry, I have to ask the Deputy to bear with me; quotations at Question Time are not permitted.
Is the Minister aware that insurance premiums in the UK are 48 per cent cheaper for comprehensive cover and 133 per cent cheaper for non-comprehensive cover than in Ireland? Does the Minister not accept that while there is much discussion about the amount of compensation being awarded to accident victims the professional fees attached to these claims are often greater than the award to the unfortunate victim?
I have been asked many questions and I have almost forgotten the first; do young people need cars and, therefore, insurance to go to work. Of course they do. I am well aware of that fact and perhaps they need them even more in this country than in most other countries because of our very poor public transport system.
That is the point I am making.
That is why I am so concerned about the matter because so many people have no option. I am well aware of the Coopers and Lybrand report which was published about two weeks ago, and I have referred to it at length. As I have said in my reply the information which is set out in that report confirms what I have been saying for some years. I appreciate and welcome the publication of this report because it gives us precise statistics which cannot be quarrelled with.
As I pointed out in the course of a very long reply, in which I tried to cover every aspect of this matter, the nub of the question for us in this country is whether we want to continue to have personal injury awards that are four times higher than in the neighbouring jurisdiction or in the other part of this island and whether we want to continue to have a rate of personal injury claim five times greater than the frequency of claims per a given number of accidents than in the neighbouring jurisdiction. If so we will continue to pay much higher premiums which the Deputy instanced. Up to now, so far as I can judge, Irish society wants it this way. When Irish society wants it otherwise, Irish society will come to grips with the difficulties we have in this abnormal award system. It will then begin to normalise itself. The Deputy is correct in saying that professional fees play a major role. I think I am correct in saying that in 1989 the total pay-out on motor claims in respect of injuries and damage to vehicles and property was approximately £400 million, of which £100 million went in legal and associated costs, such as fees paid to medical witnesses, engineers and so on.
Notwithstanding what the Minister said, will he accept that if he had implemented some of the proposals we submitted in this House last July they would probably have made an impact on insurance premiums to the benefit of the consumer by this stage? Will he agree that the delay in implementing the proposals put forward by this side of the House and indeed, some put forward by him has meant that the consumer has not benefited? Does he admit that the lack of competition is a major contributory factor? For example, it would be totally unacceptable if we only had one firm of solicitors or one firm of architects offering services here. It is obvious that if any practice has a monopoly there will be a serious problem. Will the Minister say what he intends to do——
The questioning is too long.
The Minister's reply was also very long.
I have no control over Ministers' replies but I have over the Deputy's questions.
Will the Minister indicate what a motor-cyclist should do, given that there is only one company he can go to for a quote, if he or she is refused or turned down? The same applies to any young driver of any motor vehicle. Only one company are prepared to quote for either motor-cyclists or young drivers of motor cars at present.
I am afraid that this is tending towards debate; it is not good enough.
Will the Minister accept that the survey conducted by the insurance federation favoured the insurance companies to ensure the continuation of the cartel which is operating at present?
I am satisfied that there is no evidence of a cartel in this area. If there was only one firm of solicitors or one firm of architects in Ireland, people would have no choice. If law or architecture was unprofitable we would not just have one firm of solicitors or architects, we would have no firms. In regard to the company who are insuring motor-cyclists at present, it is my great fear that they will decide to depart. What would we do then? I do not think the Deputy should complain so strongly about them. I asked my officials to go to see them in the last week or two because they are seeking a further increase and they said, "if the Minister does not like our figures, we will solve his problem by packing our bags and going back to Norwich". Irish motor-cyclists would be worse off in those circumstances. Therefore, I am not encouraging the company to pack their bags and go back to Norwich.
We have already witnessed during the past few months the loss of an insurance company from the market. They had been trading here for 110 years. That is an ominous development. I did not rejoice at the departure of that company. Happily, they had only a very small share of the motor market which, apparently, is the one that is most sensitive. If that company were to be followed by others we would have even less competition than the small amount that Deputy Durkan complains about at present. The fact of the matter is that the Deputy is not looking at the right end of this equation. It is a totally loss-making operation. While we pay ourselves five times more than other countries for accidents and claim with far greater frequency we are going to have higher premiums than other countries. No matter what Deputy Durkan or anyone else says we cannot change that unless we come to grips with it. I have sought to do this but I only get limited support.
Will the Minister agree it would be prudent to exercise a degree of caution in regard to the Coopers and Lybrand report having regard to the fact that it was commissioned by and paid for by the insurance federation who represent the interests of the insurance companies? Will he agree that there is one noticeable omission from the widespread criticisms it levels at lawyers and the Government, namely, self-criticism, and that it makes no comment on the efficient treatment of claims dealt with by the insurance companies? Will the Minister agree that many of the accusations it levels are directed at the Minister and the Government for failing to improve our road system and simplify legal procedures? Finally, is the Minister suggesting that the Judiciary, who are independent under the Constitution, are distributing largesse in making awards rather than fair and reasonable compensation?
I did not mention the Judiciary and I think I will stay off them today. Deputy Taylor, who has been questioning me in this House for a long time — long may he continue to do so — has a technique of appearing to put words in one's mouth and asking supplementary questions which are based on something one never said.
I must be hitting home here.
I am glad the Coopers and Lybrand report has been prepared because it is factual. I am not suggesting it is comprehensive in the sense that it covers all aspects of this matter but at least it gives us the comparative statistics between this country and Britain which I have been looking for for sometime. I am glad to say, as a result of the activities of the inter-ministerial group that the Department of Justice are now preparing our own statistics based on court awards here. I believe we will have these fairly soon. I would have liked to have had them before now. This will be a useful addition to the debate on this question. I hope the debate will move around towards a sense of reality and, therefore, concentrate on the appallingly high level of awards here by comparison with those in other countries.
Will the Minister accept he has failed to reform the compensation and award system in regard to insurance matters and to implement some of the proposals of the inter-departmental committee to which he referred on a number of occasions? They were to be implemented last July. Will he agree that his Department are out of touch in suggesting that the average cost of insurance for young drivers is less than £400 per annum? If a person can get a quotation from a company it is usually for more than £1,4000. Will the Minister give an undertaking to establish a tribunal, in place of the existing legal framework, to decide on compensation awards and force companies to accept a fixed level of the general motor insurance market so that a proportion can be allocated to companies?
I did not say in my reply that the average cost of insurance for young drivers was less than £400. I said that was the average cost of motor insurance per policy in the years mentioned. Obviously, the cost of insurance for young drivers is higher and, in many cases, very much higher, unfortunately. I gave the reasons for this. So far as the question of a tribunal is concerned, I advocated this on a number of occasions but I have been advised that it is unconstitutional.
Change the Constitution.
Do not draw that one on us.
We may have to look at the Constitution under several headings——
We could combine it with the referendum on the Maastricht Treaty.
——but I do not know if this would be top of the queue at present. I also do not know whether I will be able to move it up the queue. I have been told that it would be unconstitutional and if that is the case I very much regret it because there is no need for us to have a panopoly of law and lawyers deciding these routine questions of assessment of damages.
Making huge fees.
It is not needed. We had better face up to that fact.
I would like to ask the Minister two brief questions. Will he confirm if his Department sanctioned a rise in the cost of motor insurance within the last 12 months? He may have answered that already and, if so, I regret I did not hear the reply. Can the Minister do anything to make insurance companies give credit to named young drivers who have been on policies for a number of years, albeit still under 25 years of age and who are asked to pay huge premiums when they want to insure their own vehicles? They do not get any credit for being a named drivers on a policy in respect of which claims have not been made.
In reply to the first part of the Deputy's question, my Department did not give permission for the increase in premiums over the last 12 months. There is no price control in relation to insurance as I explained at length in reply to various questions.
The insurance companies have told me that that is the reason for the increase in cost.
I am grateful to the Deputy for telling me that, because insurance companies are misrepresenting the position in blaming me. However, it is not the first time that has happened to me and I am sure it will not be the last. In so far as the question of named young drivers moving from, say, a parent's policy to their own policy is concerned, we have taken that point up with the Irish Insurance Federation because it is rather unfair, particularly if they were claim-free during the period they were on the parent's policy, that they would not get credit for it. We asked the federation to draw the inequity of that situation to the attention of companies and I hope there will be a beneficial result.
Will the Minister not agree that, in spite of valiant efforts made by the Government — and a number of preceding Governments — there has been no progress on the question of insurance? There is no light at the end of the tunnel. Will he further agree that the only answer is to give serious consideration to some system of "no fault" insurance which they have in New Zealand? I have raised this on a number of occasions and I should like a response from the Minister. We have tried everything, why not give this a try?
It is incorrect to say that no progress has been made as it has been widely acknowledged that substantial progress has been made. Further progress will be made this year in legislation which will be introduced by the Ministers for Justice and the Environment. We have considered the question of "no fault" insurance. The Government are opposed to it and will not introduce it because it is not suitable for conditions in this country. We are already overly claim conscious and if the "no fault" aspect were to come in as well it would drive the whole system crazy. Even with the "fault" element there is an extraordinarily high level of claims and they would be endless and bottomless if there was a "no fault" element.
May I take it, from the end of the Minister's reply, that he is opening up the insurance market here to insurance companies outside the State towards the end of the year?
Any Community company can underwrite here from the end of November irrespective of whether they are established here. Up to now they had to have a head or a branch office here. From the end of November they will be able to underwrite here as long as they are established somewhere in the Community.
Deputy Durkan rose.
Please, Deputy.
I asked only one supplementary question.
Admittedly, it is a very important matter which warranted a long reply but that is not a reason for dwelling on it.
When EC competition becomes established in his area, will the Minister ensure that companies offering other types of insurance in this country — and other types of insurance plus motor insurance abroad — will be compelled to offer motor insurance cover here?
People are licensed for different types of cover and many of them are not interested in motor insurance in any country. Ireland is by far the most unattractive country in the world in which to underwrite motor insurance because of our claims system. I do not expect that opening up the market in November will make that much difference; I would be misleading the House if I said I thought it would. It will be very beneficial in other areas like fire insurance, burglary and so on because they are not processed through the courts system and, accordingly, they are fair and predictable.
