Seanad Éireann debate -
Wednesday, 25 Mar 1992

Vol. 131 No. 19

Cost of Motor Insurance: Statements (Resumed).

Mrs. Jackman

We are lax about enforcing traffic laws. One does not see cars parked on double yellow lines in any other EC country; they are removed instantly. We need step up the vigilance with which our traffic laws are enforced. On-the-spot fines should be introduced for failure to display "L" plates. Failure to wear seat belts should be punished but I think that law is widely observed now. There should be penalties for using a phone while driving. Vehicles driven in certain parts of the country leave a lot to be desired, especially at night; often one does not know whether a motorcycle or a car is approaching because the car may have only one light working. We do not want to turn Ireland into a police state but lives are being lost on the road through negligence.

There must be plenty of scope for mechanics to set up fairly lucrative competitive businesses to look after faulty cars. One does not have to go to the big dealers whether Renault, Peugeot or whoever. It is an area with employment potential and many young people are being apprenticed to car mechanics. They may not have the start-up money to open their own businesses but they could eliminate some of these faulty vehicles.

Uninsured drivers should have their cars impounded automatically. A number of changes would need to be implemented to control cost of claims. A quantum of damages should be introduced to control the cost of settling different claims and a claims commission should be established with the active involvement of the insured parties to deal with insurance claims without recourse to the courts and the attended legal costs. I am advised that instead of two senior barristers as formerly, a judge and one senior barrister now preside over claims cases and still costs have not decreased. What has happened since the change from the jury system? Costs do not seem to be coming down as we were told they would. A through investigation of all claims would be required to eliminate spurious and fraudulent claims. When one goes to have a damaged vehicle repaired one is asked if it is an insurance claim. If one says it is being paid for by the individual one is treated more sympathetically. There is a blanket cover charge for insurance claims and money is being creamed off in that area.

We must ask for a better deal from insurance companies. There is a need for greater transparency in the way in which insurance companies do business. We must ensure competition from European insurers; competition is the life of trade. Fine Gael propose to require publication of more information by the insurance companies allowing insurance claims to be identified and the reason for different loading illustrated. It is important that there should be openness in regard to claim costs.

On receipt of a driving licence an insurance assessor would check that one was not a liability. Before a provisional driving licence holder takes to the roads a minimum number of off the road lessons should be mandatory.

Those holding a provisional licence, and for the first two years after obtaining a full licence, should display restricted or "R" plates, an important provision because regardless of how one does in a test the experience of driving ensures that two or three years later one has learned to be a better and more courteous driver. Courtesy is lacking in the first year or two when one concentrates on practising one's driving skills. The first few years of driving form part of the learning process and "R" plates are appropriate for that time for young people who want to act responsibly. They should display the "R" plate and not exceed 50 miles per hour. Bravado breaks out at night, coming home from discos, offering girls a lift and revving up on a good stretch of road; invariably this is where accidents occur. A 50 miles per hour limit would appeal to the better instincts of young people. We need also to observe zero alcohol levels while driving which we know is quite a problem for all drivers and I should not single out young drivers; we are also talking about middle age and older drivers who take chances with alcohol levels.

Young drivers should be strongly encouraged to obtain advanced driving skills for which they would get a discount on their insurance premium. This is done in Britain. I heard an Englishman, now resident in Ireland, talking about this on the "Gay Byrne Show". I do not think he saw many drivers in Ireland who would qualify as "advanced". He was appalled at drivers in this country particularly as regards their understanding of the power of their vehicles and pointed out their potential to be better drivers if they did the advanced course.

I wish to raise a very important point in relation to job creation which we should be pushing at all times. With a backlog of 50,000 to 60,000 on the waiting list for driving tests, surely it would be in the Government's interest to employ more driver testers. Jobs would be created immediately because many people would be qualified to be driver testers. Applicants have to wait months for a test and, as a result, are paying more for insurance.

We should not prohibit our young people from driving because of a few madcaps. We should have more specific information as to which groups are causing the problem. We should address the issue of unemployment of young people who cannot drive to work. We should consider a self-financing scheme under which insurers would assess young people, charging perhaps £50 for that test. We should have more driver testers to cut down on the waiting list.

Mr. Lanigan

The cost of motor insurance has been a matter of grave concern to everybody over the years and although much has been said about it, little has been done to bring down costs. The insurance companies say they have to increase the premiums because the compensation granted by the courts to people involved in accidents is too high and the number of claims are also too high. They suggest that the claims level in Ireland is much higher than in any other European country and their charges reflect what they have to pay out in claims.

Most insurance companies are involved in many different aspects of insurance but they always seem to refer to the losses on motor insurance. They do not mention that, overall, they take in a great deal of money for other types of insurance. If you are in business you cannot isolate one area and say that, because you are losing money there you must increase the price. When these companies make huge profits on life insurance or on general insurance, they do not reduce the premiums. We have to look at the overall picture and at the profits these insurance companies make each year. Since policy holders pay in advance the insurance companies have the use of their money, and the percentage of people who make claims is very small. In general even though they might seem to be incurring a direct loss on the money taken in on premiums as against the amount paid out on claims, they do not take into account the money they have on deposit for many months or in certain cases many years. Like the supermarkets they get paid for their goods but they do not have to pay until much later. This means they get credit from their suppliers and they have the use of the customers money for a long time. As a result their margins can be very low as they take advantage of the investment markets. The insurance companies claim that they are losing money on motor insurance does not stand up. One has to take into account their investment policy and the amount of money they take from other low risk category insurances.

There has been a great deal of comment here about the cost of insurance for young people which, in Ireland, is exorbitant. It is disgraceful, but there are a number of reasons for this. It has been suggested that a higher percentage of accidents is caused by younger drivers, but I have not seen statistics to support that suggestion. There are a number of reasons younger people may be involved in accidents. One has to take into account that the first car a young driver buys is not likely to be a top of the range model with good brakes and headlights, and all that makes up a safe vehicle. Younger drivers tend to look for a second-hand car, in many cases what would be considered a banger.

Unfortunately, in Ireland, there is no way one can judge whether it is a banger because we do not have an MOT for cars. We do have DOE testing for motor vehicles over 30 cwt. and the fact that people have to get their DOE certificate every year ensures that heavy duty vehicles and small commercial vehicles are safer to drive than motor cars. Unless we introduce DOE testing for cars, we will have a large number of claims from younger drivers because in many cases their cars are not safe enough to drive at speed; indeed, in some cases, they re not safe to drive at all.

Senator Jackman mentioned the fact that at night you would not know whether the vehicle coming towards you was a motorbike or a car. Cars with only one headlamp are known as "one eyed Jacks". If there is no dipped headlamp, and if it is on the inside, you do not know if the vehicle is a car or a motorbike. The vehicle with the one headlamp might not be involved in the accident but the vehicle travelling in the opposite direction may be when the driver suddenly finds himself confronted with this "one-eyed Jack" and panics. He may hit somebody on the side of the road or another vehicle because his attention has been distracted. If a person driving a car with one headlamp is not prepared to pay a few pounds for a headlamp bulb, one can imagine what the rest of the car must be like, particularly his tyres.

I want to take issue with Senator Jackman. She said the first question you are asked when you go to a garage after a crash is "Is this an insurance claim?" She seems to be suggesting that if it is an insurance claim the garage will add to the cost of the repairs. There is a very simple reason for asking if it is an insurance claim. Generally, the cost of repairing a vehicle after an accident is very high compared to the cost of a normal service or the replacement of a set of tyres. By asking if the car is covered by insurance the garage proprietor finds out if he will be paid. If a garage carries out the repairs without asking they may be confronted by somebody who cannot afford to pay for the damages. An assessor has to see that car if it is covered by insurance. He will dictate what has to be repaired. The insurance companies are the people responsible in this case.

For younger drivers and, indeed, for all drivers, it is essential that we bring in a DOE test — we have been threatening to do so for many years. It has worked for commercial vehicles because there is no doubt that they are roadworthy. The drivers might not be safe but the vehicles have passed the tests. It is essential to ensure that vehicles are safe and have all the safety elements built into them in terms of tyres, lights, etc.

It is true that younger drivers do not have the skill to take cars on the road and are likely to be involved in accidents because of a lack of experience. Driving is a bit like rearing a child. You do not know how things will develop but you learn by experience. You learn to be a parent by experience but you can be taught to drive even before you get a licence if you attend a proper driving school. Unfortunately, the driving test is normally carried out under reasonable conditions. I have never heard of anyone taking a driving test when there was ice on the road or at night in the the rain. Driver testing takes place between 9 a.m. and 5 p.m.; driving between 5 p.m. and 9 a.m. is totally different. Why is there no element of night driving in driver testing? Why are driving tests taken during daylight? It makes no sense, because with the best will in the world, somebody like myself, who need glasses for driving, can see much better during the day than at night. There should be changes made in this area.

The insurance companies play no part in the National Safety Council who do a great deal of good work in terms of safety for drivers, motorists, and other road users. The insurance companies should be more involved with the National Safety Council and in setting up special driver schools which will not just teach a person how to pass the Department of the Environment test. There is not a driving school in the country that does not know the route of the driving test.

Minister of State at the Department of Industry and Commerce (Mrs. O'Rourke)

They go out and practice on it.

Mr. Lanigan

They go over the routes. In big and small towns there are about three routes the driver testers will use and the driving schools will obviously use those routes for their lessons. The route will include a hill, a roundabout and a place to do a reverse turn. People learn to drive on the same avenues and on the same hills. It is a crazy system of examination. This is another reason people are not skilled when they get on the road and have problems.

Uninsured drivers should be taken off the road automatically. There should be no such thing as a fine. They should be taken off the road and have their vehicles impounded. There is a precedent for this where a commercial vehicle is concerned. Under EC regulations when a driver reaches the mileage allowed on his tachograph he is not supposed to drive any further; if his vehicle is overloaded, he is not allowed to take that vehicle beyond the point where it is being weighed, if his tyres do not meet regulation standards he is taken off the road. Unfortunately, that does not happen here but if a driver from Ireland goes across the water and his vehicle does not reach the required standard in any respect, it is impounded until the tachograph or tyres are repaired or the load is taken off.

International drivers from Ireland have found themselves in Liverpool for three or four days or their vehicles were impounded on the Continent. The biggest danger we have here in terms of commercial vehicles are the drivers who come from Northern Ireland and try to get back in a hurry. They will pass you on the Naas Road doing 85 to 90 miles per hour, even on a wet night. They do not even have mud-flaps on the back wheels and they create serious problems. What happens if they are stopped for speeding? They are let off. They go back to Northern Ireland and do not return for the court hearings. If their vehicles are overloaded they are allowed back North; if their tachograph is not in order they are allowed go to the North to get it repaired but if a driver from Ireland goes to Great Britain and his vehicle does not fulfil the standard laid down in the regulations it is impounded. Vehicles should be impounded if the drivers are uninsured, irrespective of the excuse, as happens when a vehicle is found to contain agricultural diesel. Why should it not be impounded for the much more serious offence of uninsured driving?

We must introduce a law to ban all drinking while driving. There is no point suggesting that you can reduce the amount of alcohol a driver consumes. If there was a complete ban people could not drive and the accident rate would be cut dramatically. Drivers who drink should not drive. There is no point saying people can take one point, two points, three pints or even half a pint. Each person's metabolism is different so there is no point talking about limits. A total ban on drinking and driving would have a more adverse effect on people in rural areas than on people in urban areas where there are taxis available 24 hours a day. In terms of drinking and driving, young people today are much more mature than many older people.

One of the higher costs in insurance costs is for medical evidence. One of the reasons for this is that very highly paid surgeons and medical people are asked to go to court and sit there day after day and at the end of the day, perhaps 60 per cent of the cases will be fixed out of court. Even if the matter is settled in court after a number of days, the doctors will not necessarily be called to give evidence. A great deal of money could be saved if affidavits were taken from these medical experts. Not alone would you save the cost in insurance terms but these people would be able to get on with their jobs.

Some orthopaedic surgeons who work for health boards spend more time in court than they do treating the people in the health board areas. At health board or county council meetings complaints are made that hip operations are not taking place or that orthopaedic procedures are not being carried out. Often they cannot be done because the orthopaedic surgeon has been summoned to give evidence in a whiplash claim; on occasions the surgeon is not called to give medical evidence. Why then should the surgeon be obliged to attend court? If we accept that the surgeon will be truthful we should accept an affidavit. That is as good as going to court and swearing on the Bible and it would save money.

As regards compensation, there should be a set figure for the loss of a finger, two fingers and so on. The compensation should relate to the type of accident. The loss in earnings should also be taken into account.

The Garda are doing a great job trying to contain the number of accidents. We should have an extended corps to deal with traffic. Such a corps would help to reduce the number of accidents and this would lead to a reduction in the number of insurance claims thereby bringing down the cost of insurance cover.

Mr. Costello

I welcome the Minister to the House in her new capacity. I was lamenting the fact that she was not here in her old capacity earlier when I raised the issue of the Green Paper on education. We do not know when it will appear.

Mrs. O'Rourke

Or what colour it will be?

Mr. Costello

It may be yellow with age by the time we are finished with it.

The matter we are discussing is very important. We all know there is no possibility of getting cheap motor insurance here, even for experienced drivers. For young drivers it is an absolute nightmare. Insurance companies are obviously concerned about the increase in the cost of insurance. It has been going up annually. Seldom a year passes without an increase being announced. The situation here has been extremely negative in terms of the cost of motor insurance in recent years. As a result the Irish Insurance Federation commissioned the Coopers and Lybrand report which was presented last month. The purpose of that report was to show, in an independent fashion, that the high cost of insurance was not disproportionate in terms of the claims, that the high premiums were justified by the high claims. Its findings were alarming. It showed that personal accidents here were two-and-a-half times greater than in the United Kingdom and that they were four times more expensive. Fatal accidents were two-and-a-half times more likely in Ireland compared to the United Kingdom and serious accidents which were not fatal were one-and-a-quarter times more likely. Accident comprehensive claims were at a ratio of 3:1 between Ireland the Great Britain. Non-comprehensive claims were at an incredible ratio of 5:1.

Similarly, the cost of repairs were one third greater in Ireland than in Great Britain. Those are absolutely damning statistics in terms of the number of claims, the degree of seriousness and their cost.

The companies then looked at the losses they had incurred. They stated that in terms of the premia obtained there was a loss factor in Ireland between 1987 and 1990 of 31.7 per cent. In the United Kingdom which had a much lower rate of minor and serious accidents it was 19.2 per cent. The old chestnut, that motor insurance in Ireland and in the United Kingdom is a loss making operation, is not true.

The last statistic I would mention from the Irish Insurance Federation report is the survey of complaints to the Companies' Offices. Last year, 56 per cent of requests for information complained about the cost and non-availability of insurance.

There appears to be conclusive proof that Ireland is a serious risk country in terms of motor travel and motor accidents. There is a greater concentration of motor vehicles in Britain and earnings in Britain are higher but we are suffering disproportionately for some reason.

The position in regard to motorbike insurance is absolutely appalling. It appears that motorbike insurance is dominated by one company, Norwich Union, who seem to be operating what is equivalent to a restrictive practice. For example, it is impossible to get a pillion passenger insured. Should a pillion passenger be allowed on a motorbike if it is not possible to get insurance cover? It is impossible for motorcyclists to get a no claims bonus. A motorcyclist who has had a licence for a number of years and a good record cannot get any benefit. That is a restrictive practice. There is no reduction for full motorcycle driving licence holders either as should be the case. As a result, about 80 per cent of motorcyclists have only provisional licences.

It is surprising that since the 1978 legislation made helmets mandatory, minor accidents and serious accidents have increased. In 1979, of the number of people killed in Ireland in Road accidents, 9.2 per cent were motorcyclists and in 1988 this figure increased to 11.4 per cent. In 1987 it was 15.2 per cent, a very high figure, and that despite the fact that helmets were made mandatory in 1978. Since 1978 there has been an increase every year in the number of motorcycle fatalities, despite making the wearing of helmets mandatory. The number of motor bikes on the roads have decreased in the last quarter of the century, from approximately 50,000 to 24,000.

Mrs. O'Rourke

And still the number of accidents has increased.

Mr. Costello

The accident rate increases all the time. In 1979 there were 30,866 motorcycles, and in 1989 the figure was 24,492 a drop of over 20 per cent. Yet the number of accidents has increased as has the number of fatalities. We have introduced safety measures so clearly there must be other factors that are bringing about these serious accidents.

Another aspect was the question of using headlights during daylight hours. While that is mandatory in other countries, a survey carried out in Trinity College showed there was a greater likelihood of accidents occurring during the day. In fact, the survey showed that using headlights during the day, there was 50 per cent greater risk of being involved in an accident with another vehicle. Now, virtually 100 per cent of motorcyclists use headlights during day time, although it increases the likelihood of accidents. These are very serious matters that need to be taken into consideration. We must ask why has the situation deteriorated, despite the fact that we have put in place safety measures and the number of motorcycles on the road has declined.

It would seem that the solution is not to be found in the behaviour of the motorcyclists but in external factors. We have not carried out a survey to find out the reasons and until we have closely examined the situation, we will not come up with a solution to this conundrum of increased fatalities despite the increase in safety standards.

The problems to be solved are many in terms of the number of claims: why are the numbers so great, why are they so expensive and what can be done to reduce them? There is a lot to be said about the quality of driving and, as Senator Lanigan said, very often driving tests take place under ideal conditions, on an approved stretch of road and during the day. There is no test at night or when there is ice on the road.

I am not sure people know the rules of the road. It is easy to learn what is required for the test, and that is the end of it. There does not seem to be a thorough awareness of the rules of the road; certainly there is not a thorough application of them. As regards enforcement of the law in relation to the rules of the road, we have the same attitude to that as we have to the consumption of alcohol — a nod and a wink. We turn a blind eye to it. We do not have enough enforcement officers at the critical time, particularly at nighttime when people are going to and leaving pubs.

The quality of our roads is another major factor. In the last local election there were "pot hole" candidates in certain parts of the country; they were not cranks but were actually elected. This did not happen by chance but because we have very poor roads. Obviously that leads to accidents as well.

In terms of criminal behaviour, joyriding is a major factor in our cities. It gives rise to many accidents and a number of fatalities. These joyriders can seriously damage property, and they steal and burn cars. That is another factor we have to look at.

As regards claims, the level of awards for pain and suffering, for that rather elusive factor the bad back, the whiplash, the accident that brings about a medical condition that is very difficult to put one's finger on, must be looked at.

It was claimed that if we abolished the jury system all our problems would be solved because juries were over-generous and did not understand the cost of the award they made. That was unfounded and everybody knows it because juries only operate on the recommendation and advice of the judge. They seldom vary from his advice. Now that we no longer have juries, in the cases, the cost of awards is just as expensive.

The late settlement of claims is a major problem. It can take a considerable period before a claim is settled. The whole paraphernalia of a court and a judicial system is put in place and professional people come to court either voluntarily or they are compelled to come. That in itself requires quite a considerable outlay in terms of medical and legal professional fees. We must do much more to settle such cases much earlier.

There is one major solution I would offer, and that is education. It would not only be possible but most desirable that second level education would cover the rules of the road and driving testing so that everybody going through the second level educational system would be carefully imbued with an awareness of the rules of the road, the danger of accidents and have training in driving. It can be done in the classroom. One does not have to go to an expensive driving school. It could be done with the existing resources that are part and parcel of civics education, which we are in the process of revamping under the National Council for Curriculum for Examination and Assessment. Everybody leaving school would have a good grilling in the rules of the road and would also have an opportunity of doing the driving test. It would all be done in an environment of care and understanding. I would regard that as a most important development. The Government and insurance companies must come together and look at this issue. It is impossible to get proper comprehensive insurance cover at a reasonable price. If that could be done in the schools the young driver would no longer be a learner but an accomplished driver. That person would have been tested rigorously and examined on their knowledge of the rules of the road.

Early settlement is probably the second best way of ensuring that insurance costs are reduced. Most of the high cost of insurance arises from legal fees. It is not the amounts of awards. One will find that the award is seldom greater than the cost of legal fees and they should be addressed. We should speed up the legal process and move towards redressing the damage caused rather than trying to ascertain in a comfrontational fashion who is most to blame because that is what soaks up all the costs.

There is a need for more education on driving skills and a streamlined procedure for dealing with accidents to eliminate major legal costs. That would go a long way towards improving our situation.

Mr. Foley

I welcome the Minister of State, Deputy Michael Ahern, and congratulate him on his well deserved promotion.

I wish to make a brief contribution to this very interesting debate on motor insurance costs. I will conclude at 4.50 p.m. to allow Senator Manning to contribute. The cost of motor insurance in Ireland has been increasing for many years. It is now so serious that it has gone beyond all comprehension. Premiums have soared for everyone reaching massive levels for those aspiring young drivers fortunate enough to be able to get cover.

I had occasion recently to negotiate insurance for my daughter who is working 25 miles away from home and must use a car. I tried a number of brokers and the quotes were from £1,783 down to £710 which I thought was absolutely scandalous. Eventually I negotiated for £710.

It is a terrible burden on any young driver and that does not apply only to my daughter but to many young people who are working away from home and must provide their own transport. They are forced into purchasing a car and it is a big expense for them.

Premiums for young drivers are outrageous given that every one of them under 30 years of age are regarded as a high risk. One can be forgiven for saying that if this continues insurance companies will only be interested in giving car insurance to a very small group here, those they deem to be no risk who would give the profits the insurance companies are looking for. We were promised that the abolition of juries would see a corresponding reduction in the price of insurance. What happened was quite the reverse. In 1989-90 we had a price increase in insurance costs of 25 per cent. Drastic action must be taken and we must get to the root cause of these costs in the motor insurance industry.

Motorists have only been able to look with envy at the situation in Britain where cover is so much cheaper. Irish insurers claim that the blame does not lie with them. They admit premiums are very expensive but maintain they are forced to charge them and apply such restrictive entry costs for first time drivers because of the high level of claims and court awards in personal injury cases. They point to increasing underwriting losses which topped the £130 million mark in 1990 in answer to charges of profiteering at the expense of consumers. I note that there is good news in that the industry does not expect premiums to go up during this year. Underwriting losses fell sharply in 1991, possibly halving, to about £65 million.

Some time ago a report by Coopers and Lybrand, which was commissioned by the Irish Insurance Federation, supported the claim of the industry but called for an action plan to address the main factors leading to the huge gap in claim costs with the UK. As regards the value and frequency of personal injury claims its findings show that despite premium differentials with the UK of an average of 48 per cent higher for comprehensive cover and 133 per cent higher for non-comprehensive or third party insurance, underwriting losses in Ireland have been much higher. The report states that while Irish people make fewer claims than their UK counterparts, it is the personal injury content of these claims that pushes up the cost of them in Ireland. Personal injury claims are two-and-a-half times more likely to arise in the Republic of Ireland than in Britain — a statistic which suggests that the Irish motorist is more reckless than those in the UK. Two-and-a-half times more people die on the roads in the Republic of Ireland each year than in Britain. I agree with Senator Costello's remarks with regard to car repair costs and I do not wish to repeat what he said.

The move away from jury awards three years ago has not brought the cost of premiums down. However, a leading member of the insurance federation said recently that the awards were not getting larger and this was encouraging. It offers some hope that competition and the drive for the market share might make driving less expensive.

The Garda campaign against drink driving over the Christmas period was a success. Many young people in Kerry, especially in Tralee, rather than driving through urban areas to discos, socials and so on, tend to take taxies. They seem to have established this as a practice. The Garda campaign should continue all year.

The instances of uninsured driving is massive. This is partly due to the fact that premiums are excessive for young people. The law, I understand, states that for a first offence of no insurance there is an endorsement on a licence and for a second offence a six month ban is imposed. The law should be altered to ensure that uninsured drivers are banned from driving and fined in the first instance and a jail term for a further offence. We must also keep in mind that the insurance fund must meet the cost of damage caused by uninsured drivers. This again adds to premium costs.

I would like to quote some statistics that have come to hand. Accidents are more numerous on main roads than on county roads. Most accidents occur with new cars and very few learner drivers have accidents. I also understand that the majority of accidents, possibly 70 per cent, take place between 11.30 p.m. and 2 a.m. We were told some years ago that testing would help reduce insurance costs but, in fact, the opposite occurred. I understand that Government action is under way to bring motor insurance costs into line with those in Northern Ireland and Britain by curbing large court personal injury awards. I look forward to this change assisting many young drivers obtain substantial reductions in the cost of insurance.

Mr. Manning

I thank Senator Foley for very generously sharing his time with me; it is very much appreciated. I also welcome the Minister of State to the House. Our association goes back a long way and even if our mutual school is not now as successful at winning the Munster Cup as it used be in his and my time — although without any great contribution from either of us — that may be put right some time.

Minister of State at the Department of Industry and Commerce (Mr. M. Ahern)

The Senator should speak for himself on that.

Mr. Manning

I want to address one specific issue on which I have an interest, an issue which was brought very dramatically into the headlines yesterday through the award of the first structured settlement on this island in Belfast. I should like to quote the following from The Irish Times of 24 March:

In the first structured settlement in the North, Jane Kearney who is confined to a wheelchair, will get an immediate payment of £90,000 and £13,694 every year for the rest of her life, rising annually by 5 per cent.

The judge yesterday said it seemed a better way of handling such cases because they provided an annual income which is index linked. The award will cover a minimum period of 20 years. The solicitor who handled the matter said that:

Structured settlements take away a lot of financial worries of the victim in that the system is designed to ensure that compensation will be received over a period of time.

The question of structured settlements has been around for a number of years. To my knowledge, it first came to prominence in 1982, in the O'Donoghue report on the cost of motor insurance. The committee examining the question put forward a proposal for what they called periodic payments. I will explain the concept in a moment. Since then, the idea has been explored by the Department, the Law Society and the insurance industry and all have come out fairly strongly in favour of it. The Incorporated Law Society of Ireland gazette, dated October 1989 stated:

When a plaintiff receives a lump sum of compensation it may well be the single largest amount of money he or she has ever received. For somebody who is not used to dealing with money there is a danger it will be spent foolishly rather than invested wisely. This is borne out by figures in England and the United States which indicate that, even in the case of very substantial awards, half of the successful claimants will have spent the compensation within three years of receiving it and the vast majority will have done so within five years.

A further problem is that if the person is very seriously injured, he is unlikely to get advantage or pleasure from a large lump sum and it may well cause jealousy and resentment between him and his loved ones. It may put him in a position where he has to buy their affection by giving them presents and so forth. Unless the lump sum is very skilfully invested, inflation will erode it and may cause real hardship.

We have seen in this country where very large sums of money were awarded to people as a result of accidents. Obviously the money was rightly determined by the court but it was not invested wisely and within a short number of years once again the person became a charge on the public purse.

The whole concept of structured settlements which involve a once off payment and then payment on an annual basis are designed to ensure that the person who has been so injured has a guaranteed steady income for life, determined by the courts as to what is appropriate to meet their requirement and which also, of course, is index linked. As I understand it, this idea is commonly accepted in the US, Canada, Britain and, according to The Irish Times yesterday, about 60 further cases are now in the pipeline in Northern Ireland where structured settlements may be applied. This practice is widely accepted. The insurance companies themselves will buy an annuity which will allow for the payment of the structured settlement.

As I understand it the idea of periodic payments received approval in the O'Donoghue report in 1982, and since then, the Law Society have come out very strongly in favour of it. The insurance industry have also examined the concept and are strongly in favour of its introduction here. From conversations I have had with individual judges who specialise in or who frequently handle cases of this kind, they are favourable to the idea. Last year an interdepartmental committee which included a number of Departments, and was chaired by the Department of Industry and Commerce, looked at ways of reducing the cost of motor insurance and examined this idea. It is my understanding, although the report has not been published, that they are very favourable towards it.

As I understand it, the matter went into the maw of the Revenue Commissioners and the Department of Finance, that endless bottomless hole into which good ideas go and from which they never appear again. It appears that there is a problem although not a huge one, as to how this money would be taxed.

Clearly this award should not be taxed. If a person gets the full lump sum it is not taxed, but the Revenue Commissioners are not very keen to allow what they would regard as income to be untaxed. But it is not income, and that I gather, is where the problem lies.

Other countries — Britain, Canada and the US — have faced up to this problem and have overcome it. We had a precedent here, which has not been followed, in the Baby Dunne v. Holles Street Hospital, where the annual amount, if it were to be taxed, would be pointless. The nub of the issue is should the annuity be taxed. I believe strongly it should not be. If it is then the attraction of prudent investment and the guaranteed annual income for the injured party disappears.

This matter could be resolved either in the current Finance Bill, which will be published in Easter week, or simply by the Revenue Commissioners agreeing to change the regulations. As I understand it, the Revenue Commissioners and the Department of Finance see no great urgency in this matter. I think it is a matter of urgency. It could be a factor in reducing the cost of motor insurance. In the interests of people who have been very seriously injured in motor accidents, this possibility should be there for them. They should have the possibility of either having the money paid to them annually, guaranteed for life and index-linked with their immediate needs taken care of rather than the immediate once off lump sum payment which may not be adequate for their needs and which may well be dissipated, leaving them a charge on the public purse.

I urge the Minister when reporting back to his Department to put pressure on the Department of Finance to see what they are going to do. I hope the Minister will see his way to bringing this country into line with Northern Ireland and other countries where structured settlements are the norm.

Mr. Wright

I am not sure for how long Senator Doyle will be speaking but if the House agrees, we might extend this debate to 5.10 p.m.

Mrs. Doyle

Will that allow the Minister time to reply?

Mr. Wright

The Minister spoke last week.

An Leas-Chathaoirleach

Is it agreed that this debate should continue until 5.10 p.m.? Agreed. Is it also agreed that item 2 concludes today? Agreed.

Mrs. Doyle

I appreciate being facilitated. There has been an ongoing debate on the structure of motor insurance and the enormous difficulties both from the insurance companies' point of view and from the users' point of view in getting adequate coverage. In many areas, such as County Wexford, lobby groups have been established and have been very effective in recent years in bringing the plight of those who wish to have reasonable insurance cover to the fore and to the Minister's attention. I commend the Wexford motor insurance action group for their hard work over the last couple of years, particularly their secretary, Áine O'Grady and their PRO, John Doyle, who have held a regular series of meetings in all districts in my constituency and have very effectively lobbied Oireachtas Members of all persuasions. That such a group should be necessary and have such an enormous following at public meetings makes a statement in itself.

I concur with the excellent contributions that have been made on all sides of the House and the detailing of the difficulties with the accident rate, our claims rate, the level of compensation, uninsured drivers, bad roads, poor car stock and the cost of spare parts, the standard of driving and drink driving — many factors that combine to make an extremely difficult situation impossible. We recently had an excellent report compiled by Coopers and Lybrand on behalf of the Irish Insurance Federation which ultimately concluded that the rate of premiums in this country were not excessive given the large number of factors that made life very difficult for the insurance companies. That does not make good reading for the many people who want car insurance and motorcycle insurance which is proving even more difficult.

The Coopers and Lybrand report justifies this finding by saying that in this country personal injury claims are two and a half times more likely in the Republic than in the UK, non-comprehensive claims are five times more expensive, comprehensive claims are three times more expensive and personal injury claims are four times more expensive in Ireland than in the UK and damage claims twice as expensive here as in the UK. They say the fatal accident rate here is 2.5 times the UK rate and the serious injuries rate 1.25 times higher. The report pointed out that spare parts prices here are 33 per cent higher than in the UK and car repair times much longer. Those factors combine to lead Coopers and Lybrand to conclude that the rate of premiums here is not excessive and that reflects the payments made on the higher rate of claims here. It is over now to the Minister, and the interdepartmental group set up some time ago to bring sense and rationality to a most difficult area affecting private lives, business and employment.

In rural Ireland where public transport is virtually non-existent a car or a motorbike is not a luxury when used for getting to and from work. Many a person has lost a job or has been unable to take up employment for lack of transport arising in most cases from the lack of insurance cover for cars and bikes.

How will the next EC directive on non-life insurance be handled here? Will we have the insurance Ombudsman recommended by various interested parties in the discussion on the EC non-life directive or the third life directive? This directive will have important implications for the insurance industry here as it provides for free movement in relation to sales of insurance. I would like to hear the Minister's views on this matter as we need a clear understanding of implications for the industry and for the insured person of changes that will come in post 1 January 1993 or when the Single Market is in operation.

I should like to refer briefly to the problem of motorbike users. At the moment the Norwich Union Insurance Company are virtually the only insurance company who will cover motorbikes. It has been said to me that they have a monopoly of his business. I am sure the Norwich Union Company do not want a monopoly, they would probably be happy to shed their responsibility in this area but they remain the only insurance company covering motorbike users. They have dominated the market for many years and now propose to replace their rider policy with a specified bike policy with a 20 per cent increase in premiums. The rider policy is essential to motorcyclists and has been offered automatically to all applicants by the Norwich Union Company for many years. Its removal will not have any effect on accidents or claims but is being seen as an excuse for the insurer to increase the take from premiums their specified bike policies are more expensive. The Norwich Union Company claim to be losing money on motorbike insurance and I will not debate that claim given the findings of the Coopers and Lybrand report. Many people, particularly motorcyclists find the claims unbelievable as they pay premiums that are five to six times higher than those currently set in the UK. In the UK comprehensive theft and other cover options are readily available to bike users. I ask the Minister to bring this matter to his Senior Minister's and his Department's attention immediately and to indicate what assistance either his Minister or the interdepartmental group can give to motorcyclists. Young people in particular use motorbikes to get to and from work particularly in rural Ireland where they do not have the option of public transport.

The taxation of claims and award payments was covered by Senator Manning and a response on that point would be welcome as I believe it is one of the recommendations of the interdepartmental group. What action will be taken now on the findings of the interdepartmental group? Are the Government in a position to respond to the Insurance Industry Federation's report by Coopers and Lybrand and to the interesting and difficult findings detailed in it.

I thank the Wexford Motor Insurance Action Group. In a rural constituency private transport is essential to enable people to get to and from work and for private and leisure activities. If the rate of premiums continues to drive both car policy holders and motorbike policy holders out of business rural Ireland will be affected more seriously than cities and larger towns. We have all talked about this issue for far too long with little evidence of action. I await ministerial response. The interdepartmental group, from what we hear, are coming up with some rather interesting findings; perhaps they should restore the motor insurance advisory group; if I give it its correct title — that went out of existence some time ago. Perhaps the insurance Ombudsman, if he or she becomes a reality, will help in this area. Above all it is now Government responsibility to resolve an issue causing difficulty for old and young alike, which is causing job losses as well as restricting peoples' enjoyment of their leisure time.