Dáil Éireann debate -
Thursday, 27 Feb 2003

Vol. 562 No. 3

Adjournment Debate. - Insurance Industry.

Caoimhghín Ó Caoláin

I thank the Ceann Comhairle for the opportunity to raise the matter of the need for the Minister for Enterprise, Trade and Employment to take urgent action to halt the escalation in the cost of insurance which is having a very damaging effect on economic and social life, and the need for the full implementation of the recommendations of the Motor Insurance Advisory Board. My reason for raising this issue on the Adjournment and my message to the Minister are stark – the great insurance rip-off continues and it demands radical action. Jobs are being lost, companies are closing down, and business and commerce are being damaged by the scandalous and still spiralling cost of insurance cover.

It is mostly small firms which are being crippled and there are many examples. I know of a company in County Meath which had to shut down with the loss of 12 jobs because there was a 200% increase in its insurance premium. A firm in Monaghan saw its premium jump from €100,000 in 1999 to €260,000 this year. A small engineering firm which started up in 2000 saw its insurance bill leap from €2,000 in that year to an unbelievable €27,500 in 2002. Despite this company's claim free status, it is unable to get a quote.

These are but a few random samples from studies conducted within the industrial sector. They are indicative of the massive rip-off being perpetrated. A survey by Irish Small and Medium Enterprises, carried out last winter, has shown the average increase for insurance cover experienced by its members was 71% in 2002. One in five companies reported job losses in 2002 as a direct result of intolerable insurance cost rises. When this is seen in the context of the current general economic downturn in which job losses are mounting, the devastating effect is obvious. The Government may not be able to effect change in the global marketplace but it can do something about the fleecing of people in this State by rapacious insurance companies.

This was one of the main issues raised by the electorate, especially as it affects drivers, with all parties during the last general election. The Motor Insurance Advisory Board reported and last October the Tánaiste and Minister for Enterprise, Trade and Employment announced a programme of measures, including the establishment of the Personal Injuries Assessment Board on an interim non-statutory basis. I welcome the priority given to this issue by the Minister, but regrettably the measures are too limited. They treat the insurance companies and especially the legal profession with kid gloves. The Minister of State must be aware of this and I have no doubt he agrees that the rip-off must be addressed head on. Roundabout approaches and half measures are not enough. There must be direct Government control of insurance prices.

The Minister and the civil servants will respond by saying that European Union regulations prevent such State intervention in the insurance market. I do not have the legal expertise to refute that contention, but if it is the case and if there are EU imposed obstacles to the necessary measures, the Minister is duty bound to campaign, lobby and negotiate within the EU to remove them.

Another, little mentioned, aspect of the insurance rip-off is its damaging effect on social life. Sports clubs, voluntary bodies of all kinds, community groups and many others often find it impossible to organise fundraising and other events which were once their bread and butter. This is because they cannot afford the exorbitant cost of public liability insurance cover. It is stifling community life.

The measures already announced by the Government do not go far enough. I hope the Minister of State will acknowledge this and indicate the additional measures the Minister and the Department are prepared to take. More radical and comprehensive action is needed. I eagerly await the Minister of State's response.

Minister of State at the Department of Health and Children (Mr. B. Lenihan)

I make this response on behalf of the Tánaiste and Minister for Enterprise, Trade and Employment. I appreciate the constructive manner in which Deputy Ó Caoláin raised this issue on the Adjournment. We are all familiar with the condition he outlined. I share his concerns and am aware of the difficulties that have been created for individuals, businesses and the voluntary sector.

The Minister also is very much aware of the high cost of insurance in the State and of the difficulties this is creating for individuals and businesses and the effects it is having on the economic and social life of the country. These costs have major implications for companies, community and sports bodies, local authorities, motorists, households and many other sectors of society. Many reasons, both domestic and international, have been put forward by the insurance industry for the increases in insurance premiums. These include the number of accidents, the cost of settling claims, the requirement to strengthen insurance reserves, lower investment returns and the impact of the 11 September attacks in the United States.

Extensive studies have been carried out over a number of years on the cost of insurance here, notably the recent report by the Motor Insurance Advisory Board which was published in April of last year – it was referred to by the Deputy. There is general acceptance of the analysis, conclusions and recommendations contained in the report. Following publication of the report, a high level implementation group was set up and mandated to draw up an action plan for the implementation of its 67 recommendations.

On 25 October last, the Minister announced a programme for fundamental insurance reform. The programme reflects the commitments given in An Agreed Programme for Government and comprises a comprehensive set of inter-related measures designed to improve the functioning of the Irish insurance market. The key measures include the establishment of a ministerial committee, chaired by the Minister, to oversee implementation of the reform programme, including the 67 recommendations in the MIAB report; publication of the action plan to give effect to these recommendations within a target timeframe; establishment of the Personal Injuries Assessment Board on an interim basis, pending preparation of the necessary legislation to put it on a statutory footing; and publication of the report of the implementation group on the PIAB.

The Minister regards insurance reform as her number one political priority and she is ensuring that progress is made on the various elements of the reform programme. The ministerial committee overseeing implementation of the MIAB report recommendations, which the Minister chairs and which includes the Minister for Justice, Equality and Law Reform and the Minister for Transport, has had two meetings and has discussed the progress being made. The action plan itself, drawn up by the high level implementation group, was published last October and sets out the timeframe for implementation of each recommendation and by whom. A number of the recommendations have been implemented, some by the insurance industry and some by the relevant Departments, as appropriate. Progress on the implementation of the other recommendations is continuing. The Minister is willing to be benchmarked on this issue.

The report of the implementation group on the establishment of the PIAB was also published last October. I reassure the Deputy that Ministers act in the public interest regardless of their previous occupation. Following that, the Minister appointed the chairperson and ordinary members of the interim PIAB in November. The interim board includes representatives of the relevant stakeholders, that is, the ICTU, IBEC, the Irish Insurance Federation and a number of nominees with relevant expertise.

The chairperson has engaged in an intensive round of bilateral contacts with members of the interim board. These bilateral meetings have covered matters relating to the future work of the board and fundamentals of particular concern to the relevant stakeholders. Discussions have also commenced among members of the interim board on the future ongoing monitoring of delivery costs of compensation in the PIAB system.

At a recent meeting of the interim board, a number of items were discussed and agreement on how they will be progressed was reached. Outline procedures for the PIAB have been agreed and work on production of a book of quantum has commenced. Agreement on initial drafting of legislation to put the PIAB on a statutory footing was also reached. The work being done by the interim board is very necessary and needs to be done in a thorough manner so that the PIAB can proceed with its work immediately it is established on a statutory basis.

In parallel with and complementary to the reform programme, the Department of Enterprise, Trade and Employment, in conjunction with the Competition Authority, is undertaking a study of competition in the insurance marketplace, with particular reference to motor insurance, employers' liability and public liability insurance. A public consultation process has taken place prior to finalisation of the terms of reference for the study. The scope and terms of reference are to identify anti-competitive practices or other constraints on competition in the non-life insurance market in Ireland, with particular reference to motor insurance, employers' liability and public liability insurance; to highlight anti-competitive practices or other constraints that are particular to the Irish market; to make recommendations to ensure that competition works well for consumers in the Irish market; and, in the case of problems identified at EU level, to make recommendations for change at that level.

The reference to the Competition Authority is in addition to the acceptance of the recommendations in the earlier report. Considerable preparatory work on the study has been done. Tender documents in relation to necessary consultancy reports on the insurance industry, the insurance market and statistical and econometric analysis have been issued as part of this work. The bulk of this work will be completed this year and a report will be produced in the early part of 2004. It should provide accurate information in respect of the insurance market.

The Minister hopes that the reforms being introduced will bring new players into the market, thereby introducing more competition. There is a clear case of market failure here and market forces must be allowed to prevail in the insurance sector. While EU law precludes the imposition of price controls on insurance, the Minister has made it clear that she expects a quid pro quo from the insurance industry, in the form of reduced premiums, in response to the reform programme.