Vol. 465 No. 5
5 Mr. E. O'Keeffe asked the Minister for Enterprise and Employment if he has satisfied himself that all the new marketing operations will be able to meet future claims in full in view of continuing underwriting losses on motor insurance and the growth of telemarketing of insurance in this State. [8502/96]
Underwriting losses have been a feature of motor insurance business for many years. However, these losses are offset by investment returns on the financial reserves required to be held to meet outstanding claims.
In common with the trend in other European markets, there is an increasing amount of personal lines insurance business being written here through lower cost distribution channels such as telemarketing. Increased competition, coupled with new technology, contribute to lower insurance costs for consumers.
To protect policyholders, insurance legislation requires all insurance companies with their head office in Ireland to meet solvency requirements and submit annual financial returns to my Department. The latest statutory returns submitted to my Department demonstrate compliance with the solvency requirements by all such companies currently writing insurance business in Ireland.
The motor insurance market is showing consistent underwriting loses. This week FBD reported increased losses on their cars largely due to uninsured interests. I want to quote from the financial page of today's edition of The Examiner——
It is not in order to quote at this time.
The substantial losses were in the region of £25 million — £26 per car insured compared to the UK figures which show an underwriting loss of only £4 per car insured. In view of the perceived low risk, undercutting by established companies and the cherry picking by new companies, what steps does the Minister intend to take to protect established companies from such cherry picking?
It has been a feature of the insurance business for many years that the underwriting losses to which Deputy O'Keeffe referred occur. It is the other side of the coin of the normal questions one is asked about insurance, why it is so difficult for a young driver to get insurance at a reasonable rate. The fact is that the claims profile is such that it has produced this problem in Ireland. I do not believe the new means of marketing to which the Deputy referred in his question will do anything but improve that position. It has brought greater competition into the marketplace. For example, we are particularly suited to adapting telemarketing techniques. The total segment of the motor insurance market accounted for in this type of personal lines of business is approximately 10 per cent. I understand in the United Kingdom the figure is approximately 40 per cent and it is reasonable to conclude, therefore, that it will increase. I am concerned with ensuring that the solvency requirements and the general supervisory role of my Department is complied with, and all the information available to me suggests that it is.
Is the Minister satisfied with the Cabinet requirements on all new entrants to the business? In the 1980s the PMPA crisis was signalled well in advance by brokers and others, yet successive Governments continued to renew its licence. Since that time we have witnessed the débâcle involving the Insurance Corporation of Ireland for which many banks had to pay. There is a precedent for this and I want to know if the Minister is satisfied that new entrants to the market are secure as there is concern in the market.
We have learned a great deal from the crises involving PMPA and the ICI.
The regime applying for authorised insurers in this economy is strict and rigid. All applicants to write insurance are examined and subjected to detailed scrutiny. There have been other developments as well. I would draw the attention of Deputy O'Keeffe to the requirement in the 1989 Act that requires auditors to advise my Department——
Properly qualified auditors.
——if, during the course of the audit, they uncover anything they consider ought to be brought to my attention. I am not aware of the concern in the marketplace to which Deputy O'Keeffe refers, partly because of the strict regime which is applied scrupulously, having regard to the experience in the past to which he refers from which we have learned a great deal.
There is concern in the marketplace and especially in the insurance market. Is the Minister satisfied that all new entrants have the capital resources to bear a crisis, should it arise, rather than have the taxpayer or the bank pick up the bill?
We are having repetition here.
I am informed there is concern in the market.
That is news to me. The answer to Deputy O'Keeffe's question is yes, I am satisfied, but if he has any specific information I look forward to having it examined.
