I thank the chairman for the opportunity to make a presentation to the committee. I will try to keep it to a lot less than ten minutes in order to leave as much time for discussion as possible. The committee has our written submission in response to the advertisement in March, and I will not go through that in detail. I will highlight the main points in that submission and then give our views of what the priority areas are for legislation and other reforms which are needed to improve the situation, particularly for liability and motor insurance, which I think are the main concerns of the committee.
There are four main points I wish to stress. First, the liability and motor insurance markets in Ireland have consistently lost money for a number of years, leading to the significant increases in price that we have seen over the past few years, and also to a reduction in the underwriting capacity available, particularly on the commercial liability insurance sector. This is due to a number of influences, partly the local conditions under which we operate, which the previous speaker referred to, and partly some global influences.
Second and of fundamental importance, in all classes of insurance, and no less in motor and in liability, the level of premiums is driven by claims costs, which insurers must meet. If we are to seriously tackle the level of premiums which have to be charged in motor and liability, then we have to get the level of claims costs down.
Third, in order to reduce claims costs, there have to be reductions in one or more of three things: claims frequency - that is the number of claims relative to a measure of exposure; in other words we must make our roads and workplaces safer, leading to fewer accidents and claims; the cost of claims - and we have heard some examples already in relation to compensation for personal injury, and how that varies in Ireland compared to other countries. As I understand it, there are no plans as part of the existing reforms package to address this issue, although we would hope to see greater consistency in awards as a result of the planned improvements in court procedures, the establishment of the Personal Injuries Assessment Board and the database of the level of awards and settlements, which that board will maintain. While they may not reduce the overall cost of claims, these measures may help to stabilise claims costs and minimise some of the inconsistencies which we see at present.
The fourth element is the delivery cost of claims - the legal costs and the professional witness fees and report costs, to which there has also been reference.
I stress the support of the IIF for the existing reform programme, based on the recommendations of the Motor Insurance Advisory Board, which the Tánaiste launched some months ago. More than 50 out of 67 MIAB recommendations, and all of the core recommendations which have the potential to save claims costs, are directed to various arms of Government, rather than to the insurance industry. The IIF has done what it can, and has implemented virtually all of the recommendations addressed to it. I stress that these are not the core ones, and a lot remains to be done by the Department of Enterprise, Trade and Employment, the Department of Justice, Equality and Law Reform and a number of other agencies.
On what the priorities should be, what the reforms which have the most potential to improve the situation are, I believe that this committee has an opportunity to influence the content, priority, timing and speed of implementation of some of these reforms. I urge the committee to look at three areas in particular. The first is safety and law enforcement. A number of issues need to be dealt with in this area. We need early adoption of the new national road safety strategy. The last one, which was the first such national strategy, expired at the end of last year, and we still have not got a new one in place. It is proposed that there will be a new three-year strategy, and I hope it will be agreed in the next few weeks. We have lost momentum because there has been a hiatus between the end of the last strategy and the agreement of the new one.
We need full roll-out of the penalty points system supported by adequate detection and processing systems. There have been suggestions in the press that the IIF is not fully behind the penalty points system, but, in fact, we greatly support it. We are concerned that it is not being seen to be as effective as it should be, and that is due to the infrastructure and resourcing at the enforcement end. We want to see penalty points work, and we believe the system will work if it is properly resourced.
The establishment of a national road traffic corps with sufficient budgetary and operational autonomy is a key element. It is in the programme for Government, and I see from press reports that it is currently under consideration by the Minister for Justice, Equality and Law Reform and the Minister for Transport. We welcome that.
The Safety, Health and Welfare at Work Act is under review and it is important that this work is completed quickly. A general review is needed of the efficiency and effectiveness of the deployment of enforcement resources, both through the Garda in relation to road safety, and the Health and Safety Authority's inspectorate, and it is important to supplement those resources where necessary. As in other areas it is important to ensure that what is currently being used is deployed efficiently.
On other aspects of the insurance reform programme, the first priority is early passage through the Oireachtas of the Bill to establish the personal injuries assessment board. The heads of the Bill have been published, but we have not yet seen the detail. It is important that it is up and running in January 2004 as planned.
We need early publication and adoption of the legislation which would carry out a number of actions highlighted by the MIAB report. It would reform and streamline court procedures, increase deterrents to fraudulent and exaggerated claims - a very important area - oblige the court to actively manage injury compensation cases before it and encourage mediation between parties, rather than wait for a case to proceed at the slowest pace.
It is necessary also to review the system for adjudication of disputed legal costs. The previous speaker noted how legal costs can often contribute a lot of expense on top of the actual award. The current system for the taxation of costs is flawed, and needs to be reviewed.
We need increased deterrents, criminal sanctions for uninsured driving, including confiscation of uninsured vehicles, increased fines and the use of the proceeds of fines to defray part of the costs of claims against uninsured drivers which are paid through the Motor Insurer's Bureau and, ultimately, by the policyholders.
A more informed public debate is necessary on the appropriate level of compensation. In the past, the focus has tended to be on the levels of general damages, the damages for pain and suffering, compared to other countries. There is no doubt that courts in Ireland are more generous, in comparative terms, but the other element is the breakdown of how some other costs are paid. In Ireland we tend to rely on the private insurance system to pay health care costs and compensation for loss of earnings after an accident. In many other countries these are provided for through the public health care and social welfare systems. It is not just a question of the courts being more generous. There is a different border line between the public and private compensation areas, and that may need to be looked at.
We agree with some of the areas identified for reform by the chairman of the Competition Authority in his submission on encouraging effective competition. There is an overlap in terms of safety promotion, the reduction of accidents, tackling fraudulent and exaggerated claims and encouraging predictability and consistency in levels of compensation - and making the legal system work more effectively to determine compensation in personal injury cases.
The insurance industry is playing its part through the implementation of relevant MIAB recommendations addressed to us. We are also trying to improve co-operation with policyholders in the conduct of business, in particular in the investigation and handling of claims. We have agreed a new code of conduct with IBEC on defending fraudulent claims, providing advance warning of renewal terms and also consulting policyholders in relation to the defence of claims.
We welcome and support a number of the measures in the Tánaiste's reform programme and in the MIAB's recommendations, which we called for over a number of years. We are open to co-operating with any authority which will make a serious attempt to address the causes of the high cost environment in which we have to operate because, ultimately, it is not in our interest, that of our policyholders or the national economic interest for the levels of premium to be as high as they are or the availability of cover to be as restricted as it is, particularly in the liability insurance area.