I thank Deputy Kirk for his kind remarks on my appointment and for giving me the opportunity to address this important issue.
As the House is aware, insurance costs in Ireland are high both in absolute terms and relative to costs in other EU member states. I am concerned about the implications of these higher costs for business, the community at large and the private motorist in particular. In this regard, my Department has been examining the factors contributing to the high level of insurance costs in Ireland relative to other competing economies. In this regard, particular attention has focused on a number of key elements of cost, namely the levels of personal injury compensation; the costs associated with settling compensation claims; and the frequency of accidents and claims.
I am hopeful that, following this evaluation, proposals will emerge that will bring about a moderating impact on the cost of insurance generally. It must be borne in mind, of course, that the insurance industry has a responsibility to ensure that those costs within its sphere of influence are controlled to avoid unnecessary cost for consumers and business in general.
As a society, we need to examine our own system of values with particular reference to our expectation of adequate levels of compensation when, as individuals, we are the victims of accidents; while, on the other hand, as consumers, we are reluctant to pay commensurate levels of premium or the price required to deliver on our expectations.
I have already indicated to the House the specific insurance cost contributory factors which are currently under examination with a view to alleviating the cost burden on business and the public at large. Such costs act as a constraint on the ability of Irish-based insurance companies to compete efficiently in the marketplace and can thus affect employment levels. It is essential, therefore, that measures should be devised, in consultation with the key interests involved, to reduce the insurance cost burden on the economy.
At the same time, I must emphasise the need to ensure that authorised insurance companies be in a position to meet their statutory reserves and solvency requirements. The purpose of these requirements is to ensure that adequate financial reserves are in place to meet claims as they arise while, at the same time, maintaining the solvency of insurance companies. In order to meet these requirements and operate on a viable basis insurance companies must be allowed the freedom to set their insurance rates, including rates for motorists and business, in the light of their underwriting experience.
There is no doubt that high insurance costs have substantial financial implications for everyone who has to fund such costs. Motorists generally and young drivers in particular consider, understandably, that the cost of motor insurance is excessively high. However, high insurance costs are a function of the frequency of accidents and the levels of compensation awarded to accident victims, including motorists and pedestrians. Clearly, there has to be some trade-off between the levels of compensation sought and the levels of premium motorists are willing to pay. High motor insurance costs limit, among other things, labour mobility where private transport is essential for travelling to work. They also contribute to jobcreation restrictions and affect the level of retention of existing jobs reliant upon the use of transport.
Fundamentally, the cost of insurance, including motor, employers' and public liability insurance, is determined by the frequency of claims and the cost of settling those claims. In 1992 and 1993 insurers suffered underwriting losses, that is, they paid out more in claims than they received in premiums. The losses for 1992 were £45 million and £51 million on their motor and liability, employers' and public, accounts, respectively. The corresponding figures for 1993, the last year for which figures are available, were £50 million and £48 million respectively. Confronted with losses of this magnitude and in order to maintain their viability, insurers have considered it necessary to charge premiums which reflect their underwriting experience and to rely more heavily on investment income to maintain their statutory financial guarantees.
The evaluation by my Department to-date of the findings of domestic and international research studies has indicated that the costs of motor, employers' and public liability insurance claims in Ireland are out of line with other European countries, including our nearest trading partner, the UK. Research findings have also indicated that insurance premiums in Ireland are substantially higher than in competing economies, including the UK. This represents a significant cost penalty to business in Ireland and there is undoubtedly an adverse impact on the traded sectors of the economy in terms of output, employment maintenance and creation, and the ability of firms to compete in the marketplace. As Deputy Kirk said, many businesses are finding it increasingly difficult to obtain employers' and public liability insurance at an affordable price and, in some cases, to obtain such insurance at all.
I expect that, when my Department has concluded its cost evaluation and consultation process into the major factors contributing to high costs of insurance in Ireland this will lead to the finalisation of proposals for submission to Government which should have an effective impact in reducing insurance costs here to more internationally-com-petitive levels. However, Government action in isolation will not solve the problem of high insurance costs in Ireland. The general public, insurers, motorists, trade unions, employers and employees all have a role to play in this regard.
There is an urgent need for a greater awareness of the need for safety on the roads and in the workplace. Measures which aid safer driving and safer working methods should be encouraged and insurers should control those factors within their ambit so that inefficiencies in the insurance sector do not give rise to any unnecessary costs which have to be borne by the community as a whole.
Successive Governments have endeavoured to reduce insurance costs through a variety of measures, both legislative and otherwise, including the following: the establishment of the Health and Safety Authority — I understand that the authority has recently recruited a number of additional inspectors to facilitate the enforcement of health and safety at work legislation — with responsibility for all aspects of occupational health and safety; the enactment of the recent Road Traffic Bill dealing with drink driving; the provisions of the Courts Act, 1988, which abolished juries in personal injury cases; the provisions of the Courts (No. 2) Act increasing the jurisdiction of the Circuit Court for adjudicating on claims up to £30,000 which should in the long term reduce legal costs and delays in settling claims; and the ongoing programme to upgrade the road network.
I also understand that IBEC has recently embarked on a safety campaign among its members designed to reduce the level of accidents in the workplace and to reduce the level of employers' liability insurance claims. I will also be exploring with the National Authority for Occupational Safety and Health and the Irish Insurance Federation, with whom I will meet shortly, methods to enable insurers to participate in the implementation of health and safety measures and in the promotion of greater safety awareness in the workplace.
The Dáil adjourned at 5.25 p.m. until 2.30 p.m. on Tuesday, 7 February 1995.
