I move:
That Seanad Éireann notes with concern the cost of motor and liability insurance; and requests the Minister for Industry and Commerce to take urgent steps to remedy the position.
At the outset I declare my interest in this debate. I have an interest both as an insurance broker who worked within the insurance industry from 1956 to 1968 before starting up my own insurance brokerage and also as a public representative. The problem of high levels of insurance premiums has been mentioned to me both as an insurance broker and as a public representative. Within the last 48 hours I attended a meeting where the question of the high cost of motor insurance in particular for young people was discussed at length. At a meeting of the General Council of County Councils some months ago in Ennis a long and very similar discussion took place.
Insurance premiums for motorists employers' liability and public liability are very high in this country for many reasons. We have become a litigious minded race and there is a high level of claims consciousness in this country. Secondly, the number of accidents on our roads and in the worksplace has increased over the last number of years. Thirdly, the cost of settling claims has increased dramatically and fourthly, the very high number of uninsured vehicles on our roads contributes's to premium costs.
I share the concern of insurance companies operating in this country, a concern shared by the general public and indeed by the Government on this question. In my 23 years as an insurance broker the possibility of young drivers getting a quotation, not to mention a reasonable premium, has never been as bleak. It is a well known fact that motor insurance premiums are higher in this country than in most other European countries, and not merely for young drivers. Internationaly, young drivers constitute a high risk group for the purpose of motor insurance and their premiums tend to be well above average as a result. In general male drivers constitute a higher risk than female drivers. Consequently young male drivers pay the highest premium of all.
In relation to any risk group the premiums are largely determined by the claims experience of the group. Unfortunately Ireland has a particularly high accident rate which results in the large number of claims in proportion to the number of insured vehicles on the road. We also have relatively high levels of compensation for personal injuries, high vehicle damage and repair costs and high legal fees. These combine factors result in a high average cost of claims compared to other countries. The combination of high average claim costs and high accidents and claim frequency results in very high total claim costs. These costs have to be funded from premiums and dictate the rates charged to policyholders whether old or young.
It should be stressed that even with these high motor insurance premiums, I have been informed that the insurance industry has made substantial underwriting losses in recent years. In 1987 the loss was £33 million, in 1988 it was £49 million, in 1989 it was £116 million and an estimated £130 to £140 million in 1990. It is clear, therefore, that the premiums currently charged are inadequate to meet claims and expenses, even though they are extremely high for young drivers in particular.
To some extent insurance companies are partly to blame for some of their current problems. During the period form 1987 to 1989 excessive competition prevailed in the motor insurance market resulting in rates being depressed to uneconomic levels at a time when both the number and the cost of claims were rising. Insurance companies made substantial losses, as I have outlined, in order to place their business on a sounder financial footing and have had to increase motor insurance premiums very significantly during the past year. Unfortunately it looks as if further increases will be necessary in the year ahead.
When we look for the reasons insurance costs are so high in this country compared to most other European countries, three basic issues stand out. Firstly, we have more accidents per head of population than other European countries. For example, in motor insurance, the number of people killed on our roads each year expressed as a percentage of the number of registered vehicles is double the UK and significantly higher than most other European countries. Secondly, we pay accident victims substantially more in compensation than do most other European countries. I read recently of a victim who lost the sight of one eye having compensation for pain and suffering in this country estimated in the region of £83,000 to £85,000 whereas in the UK for a similar injury the victim would receive approximately £30,000; countries like Portugal and Greece the figure would be in the region of £3,000 to £5,000. A whiplash injury in Ireland would cost the insurance company in the region of £15,000 to £18,000; in America a whiplash injury entitles one to $4,000 to $5,000 only.
Thirdly, the cost of motor insurance is exacerbated by the national level of uninsured driving which is significantly higher than most other European countries and is currently estimated at between 6 to 8 per cent of the total number of registered vehicles, whereas the average in Europe is less than 1 per cent. I mention these points as practical reasons for the continuing high cost of motor insurance premiums, especially for young people.
The cost of motor insurance in Ireland cannot be reduced unless and until we decrease our accident rate and reduce also the level of compensation paid to accident victims. We cannot have a substantially greater accident rate than most other European countries, pay subtantially more compensation to our accident victims and yet expect insurance companies to sell insurance at prices comparable to other European countries.
There is no doubt that with the right commitment from the relevant authorities significant progress can be made in reducing our road accident rate. During the major Garda clampdown on drinking and driving during December 1990 the number of road deaths was reduced by almost a third. I am glad that this campaign will be repeated again this December and I congratulate the Minister for Justice for doing so.
There is an urgent need to change the attitude of road users towards road safety generally. There is evidence that the public favours stiffer action against those who drink and drive. The insurance industry, through the Insurance Federation, has recently launched in conjunction with the National Safety Council a major publicity campaign costing about £200,000, which will, I hope, change the attitude of the public towards road safety and towards law enforcement generally.
The task of reforming our legal system and reducing the high level of settlement claims in Ireland is much more difficult. Previous attempts to change the legal system through the abolition of trial by jury has not led to expected savings in legal costs. In addition, the level of damages awarded by judges sitting alone are higher in many cases than those that were given by juries. In the past number of years insurance companies have proposed many reforms with a view to reducing premiums. The Courts Bill — which abolished juries — was one. Another was the rule to remove the necessity for two Senior Counsel and another introduced restricted fees for Junior Counsel. There is no indication that these innovations have served their purpose. Instead, the level of insurance premiums has gone up, particularly in the case of young drivers. It has been very strongly suggested to me that under the present system awards issued by judges are higher than in the pre-Court Bill days.
The high cost of public and employers' liability is adding enormously to the costs of industry, including retail and wholesale outlets, payment of tradesmen, builders and many other enterprises. There is no doubt that jobs are lost due to the excessive cost to public liability and employers' liability premiums. Local authorities in particular are very badly hit. Boards such as health boards, vocational education committees and other local authority bodies are finding the burden of public liability premiums in particular extrememly onerous. All of them are experiencing great financial difficulty, and the high cost of public liability, in particular for county councils and corporations, has led in many cases to dramatic increases in the rates. County Councils are at present examining this situation and I am informed that Limerick Corporation have been charged a premium this year in excess of £2 million for public liability alone. That has been reduced subsequently to £1.8 million. Cork County Council will be charged a premium of £1.5 million. My own county of Westmeath is being charged a premium of almost £0.25 million for public liability.
In 1987 the company which transacts the business of most public authorities, the Irish Public Bodies Insurance Company, was obliged to introduce a £5,000 excess on every public liability claim. The bill for that first year of the £5,000 excess has now been handed to Westmeath and it is £41,170; and obviously that will grow larger each year. Having made the point about the Irish Public Bodies Insurance Company, I want to make it clear that I have great respect for them. They are a small company who are doing great work for the local authorities of Ireland and if local authorities were to seek insurance elsewhere tomorrow I do not think they would secure it as efficiently and as expertly as with the Irish Public Bodies. I have been a long-time friend of the Irish Public Bodies Insurance Company; indeed Senator Honan is a director of that company and knows its business affairs very well.
Recently a high level of fraudulent claims was disclosed. The number is growing constantly and is causing serious concern. I have been informed many times of the famous incident where five men in this city fell into the same hole on the same night after leaving a pub and they were all far from their road home. People in the Irish Public Bodies Insurance Company could reveal hair-raising stories of fraudulent claims. Local authorities are vulnerable to such claims on public liability insurance and this, of course, has a bearing on the cost of insurance.
A new system will operate after 1992 when European companies will be allowed to compete fully in this country but there is a naive view abroad that this development will produce a miraculous drop in the cost of insurance in Ireland. The advocates of that point of view seem to be unaware of the fact that by European standards the Irish market already has the highest foreign penetration level of any insurance market in Europe. Over 75 per cent of the total premium income generted in the Irish market is now controlled either by branches or subsidiaries of overseas companies. Most major European countries already have a presence in the Irish market.
Much could be done to improve the insurance situation. Strict enforcement of the laws regarding seat belts would help as would compulsory checking of cars. Further information and further checks on safety in the workplace would help. Additional reform of the legal system would help, as would the introduction of minimum fines for uninsured drivers. The Garda should have power to impound uninsured vehicles. All of us have a role to play in reducing insurance premiums whether as legislators, policy holders, members of the insurance industry or Government.
The decision to set up an inter-ministerial committee on motor insurance is a clear sign the Government recognise the problem of high insurance costs and that it must be addressed as a matter of priority. We must all support any proposals which will reduce the number of claims and thus enable insurance companies to bring down the cost of insurance for Irish policy holders, and in particular for young drivers. It is clear, however, that if insurance costs are to be reduced the inter-ministerial committee will have to take a number of very difficult decisions if we are to achieve a substantial improvement in our accident rate and reduce the level of compensation paid to accident victims.
Insurance is an issue in which I have a particular interest. I accept fully that we have problems regarding motor insurance and public liability and liability generally. I recognise the unfortunate position that insurance companies find themselves in: if they do not get in the premiums they cannot pay out the claims; hence they are forced to charge high premiums. I recognise that we have a role to play and I am looking forward to hearing what the Minister of State, Deputy Leyden, has to say to us this evening regarding this matter.
