Dáil Éireann debate -
Wednesday, 28 Nov 2001

Vol. 545 No. 2

Adjournment Debate. - Insurance Costs.

Mr. Crawford

I thank the Ceann Comhairle for allowing me to raise this important issue and the Minister of State at the Department of the Environment and Local Government, Deputy Dan Wallace for being in the House at this late hour.

The increase is general insurance is very serious, whether it is for cars, lorries, homes or anything else. The issue to which I wish to refer is insurance for hackney drivers. A few weeks ago I was advised of a hackney operator whose insurance for third party, fire and theft on a car worth £6,500 was £1,900 in 2000 but increased to £3,300 this year. He is now waiting to renew his other insurance. Yesterday another hackney operator gave me renewal notices for his minibuses for 2001, the cost was well over £9,000 while it was well under £4,000 last year. The cost of insurance for another car, with a different company, increased from £1,150 to £4,850 in two years. He was offered an instalment plan with interest of 17%.

Can any business carry this level of increase? Can this House stand idly by and watch as hackney operators are forced out of business. The car with almost £5,000 in insurance costs would have to travel 11,000 miles to pay for that insurance alone. I have received a copy of an explanation from one insurance company which reads:

Unfortunately, due to the unprecedented rise in claims costs, motor insurance premiums across the board will increase this year. Our Bus & Coach Insurance Programme is no exception and I regret that we have had to impose a "claims factor" loading on all of our clients.

The increase in traffic. the appallingly low standards of driving, and the inflation in wages, medical and legal costs have combined to produce the worst results in the motor industry for some time. We aim to reduce this increase over the next three years through your good management, continued loyalty to the programme, driver training at advanced level and major group discount packages – all to be introduced during 2001.

Unfortunately, and at this time, our premium reflects these increases. I do hope you understand the position and our obligation to always protect your interests through the provision of a strong, solvent and reliable Bus & Coach Insurance Programme.

Has the Minister made any inquiries as to why there are increases such as that from £1,100 to £5,000 in two years? Have insurance companies got a free hand to charge what they like? Has the Minister had any meetings with them? I hope the long awaited Road Traffic Bill, 2001, which is currently before the House, will improve driving standards. The Government must give some immediate support, especially in rural areas where there is no alternative transport.

When the aviation industry was affected following 11 September, special arrangements were made. There is no doubt the events of 11 September had some influence on insurance pre miums. Some support or intervention with the insurance companies must happen immediately if the hackney industry is to survive, especially in Border areas. Already there are quite a few cars working there and I question whether they are all working under the same regulations, or if the Garda Síochána are fully implementing the rules they are supposed to oversee. The hackney industry has increased in size in recent years since new drink-driving regulations were introduced. The industry provides a good service at all hours of day and night. The availability of a good hackney service is vital to ensure that young lives are saved. If the service is not available more drivers may take chances under the influence of alcohol and we have all seen the results of that.

Emergency legislation is before the House to pay an insurance increase for Aer Lingus. Can the Minister do the same for hackneys? Otherwise even more cars will give a service without proper insurance and operate under ordinary private insurance without hackney plates. Insurance claims have cost more in legal terms than compensation paid. Urgent action is required.

Minister of State at the Department of the Environment and Local Government (Mr. D. Wallace)

In the past two months there have been numerous letters and telephone calls from the public and from businesses indicating that motor, liability and property insurance premiums have increased substantially in the period. The latest CSO figures are for mid-October and therefore would not fully reflect the events in New York on 11 September. Nevertheless, for house insurance they show an increase of 11% as compared with mid-October 2000 and an increase of 27% for motors. These statistics reflect the market as a whole. I am aware that individuals and businesses are facing increases that are much larger than this. I understand many businesses and individuals are experiencing extreme difficulty in meeting these increased premiums.

There are a number of reasons, international and domestic, for the sharp increases in the past two months. Insurance is a cyclical business, and it has been generally agreed that after a number of years of technical losses, the industry, both in Ireland and elsewhere, is entering a phase of the cycle where prices are increasing. That effect has been intensified by the events of 11 September. Reinsurers in particular have borne the brunt of the cost of the events in New York and have had to increase rates to compensate. These events also point to an increased risk in certain types of cover, including cover against losses from terrorist attacks. Reinsurers have reconsidered the cover they are prepared to underwrite and have introduced restrictions. The net effect for consumers is that the cost of insurance cover has increased dramatically and the availability of cover has contracted.

Insurance costs are also related to the cost of settling claims. These costs are high in Ireland because most compensation for personal injury is paid through a private insurance system rather than the social welfare and public health systems. Two recent High Court judgments may have the effect of increasing awards in outstanding as well as future cases, thus requiring insurers to strengthen existing reserves. Of the total cost of settling personal injury claims in Ireland, an estimated 40% is accounted for by legal expenses.

It is clear that insurance costs can only be reduced by tackling their underlying causes. The Government has a number of initiatives to reduce claim costs, thus reducing insurance costs. These initiatives include measures, including the Road Traffic Bill, to reduce motor accidents, the strengthening of the HSA and the promotion with the social partners of the workplace safety initiative to reduce accidents in the workplace.

There are two initiatives specifically related to insurance. The Government has decided establish a personal injuries assessment tribunal so as to reduce the costs of delivery of personal injury compensation. I should stress that there is no intention to reduce the amount of compensation to injured parties. An interdepartmental implementation group, charged with progressing the establishment of the PIAB expects to report close to the end of the year.

The motor insurance advisory board was set up to advise on motor insurance issues generally and to report on premiums charged for motor insurance, with particular reference to the relationship between premiums charged to different categories of driver and the claims experience for that category. That board will report close to the end of the year and its findings are awaited with interest.

I am aware that some taxi drivers have been quoted greatly increased premiums. Unfortunately, so have other policyholders, including other businesses that provide employment. Clearly, the Government cannot intervene on behalf of one category of insurance policyholder, especially when all categories are experiencing similar difficulties. I would encourage policyholders, including taxi drivers, to seek as many quotations as possible either through broker channels or directly from insurers. I would urge insurers on the other hand to explain clearly to their clients why increases, when unavoidable, are necessary and to discuss risk minimising stra tegies with their clients with a view to moderating premium rates.