Tá sé mar chúis áthais dom bheith anseo ar maidin chun freastal ar an díospóireacht seo faoi tuarascáil an Bhoird Chomhairleach Árachais Ghluaisteáin. Déanaim comhghairdeas leis na hoifigigh agus an bord a chabhraigh linn i rith na blianta atá caite leis an tuarascáil forleathan, cruinn, beacht seo a chur faoi bhráid an Oireachtais agus na tíre.
As public representatives, we are all only too well aware of the increasing difficulties regarding the availability and price of liability insurance. A non-exhaustive list of the reasons for this would include in particular the level of claims; the increasing level of awards; poor investment returns; the substantial increase in reinsurance costs; the implementation of recent court judgments; legal costs and the method for determining them; foreign insurers opting out of the Irish market; the increase in the capital base of insurance undertakings required to support increased premium income; and the reluctance of parent companies to invest capital in insurance undertakings.
The nature and scope of these difficulties require a response which is multi-faceted in its approach and which would include the following actions: Government support for the excellent report presented by the Motor Insurance Advisory Board, with the preparation of an action plan for the implementation of its many recommendations within three months; with the Personal Injuries Assessment Board report nearing completion, a speedy Government response in due course to what will emerge, including taking a strong stance on any hostile reactions; further improvements in both health and safety measures; encouragement of the Irish Insurance Federation to adopt a policy that "any firm that has a claims free record, for a number of years, with a particular Insurance Undertaking will not face significant increases in Premium;" and pressing the European Union for greater action on making the Single Market for insurance products a reality across Europe.
Last week I was pleased to be able to publish the large report from the Motor Insurance Advisory Board, the most comprehensive study and analysis of the Irish motor insurance industry ever undertaken. I take the opportunity to reiterate my deepest appreciation to all board members. Thanks to their dedication, this huge report has been completed with professionalism and tenacity. It is clear that an enormous amount of work has been undertaken in the period since I first legally established the Motor Insurance Advisory Board back in September 1998 under Statutory Instruments 299/84 and 359/94.
The new board commenced its great challenge under the chairmanship of Ms Dorothea Dowling who previously worked for 16 years in the insurance industry in both Dublin and London. The board represents a wide range of interests, including insurance users and providers, consumers, road safety and road traffic interests, accident victims and young drivers. The report has clearly benefited from the combined wisdom of all board members. Among its key findings are the following.
The Motor Insurance Advisory Board is firmly of the view that, because motor insurance against third party injury and damage is compulsory, it must be open to public scrutiny. We would all agree with this view. The high cost of insurance here, compared to the rest of Europe, is underlined in the report. Motor insurance is one of the biggest bills a household faces in a year. The three main sections of the report reflect that the cost of insurance is determined by three main factors, namely, accidents in terms of both their frequency and severity, the cost of claims within the current compensation system and the operation of the insurance market. The board makes it clear that tackling one of these factors without giving the required attention to the others is unlikely to achieve better value for money for law abiding motorists, the majority of whom have never been involved in a culpable accident.
The report stresses that tackling the current cost of motor insurance is not a party political issue, since the state of affairs now obtaining was not achieved overnight. Successive Administrations have failed to tackle the vested interests and inefficiencies that collectively may account for as much as half the premiums paid by law abiding motorists. The board points out that, while its recommendations are not presented in any order of priority, many are interrelated to the extent that objectives are only likely to be achieved by co-ordinated action in a number of areas. It underlines the fact that long-term measures are required for success.
The board contends that the current situation suits too many interests. These include the State, which collects a 2% stamp duty on premiums and, presumably, appropriate levels of taxes from all the various parties who profit, the legal profession – the report records the refusal by the Incorporated Law Society of Ireland to make a submission to the board – and insurers, who regard returns on investments, at 4.2%, as too low. The report considers it a matter of interest that, although insurers in Ireland and the United Kingdom assert that returns to shareholders are inadequate, motor insurers in Ireland, where claims costs are among the highest in Europe, reported 11 times the total post-tax profit earned by their UK counterparts between 1983 and 1999.
This is the first and only Motor Insurance Advisory Board to secure access to insurers' raw data on premium income and claims costs, on which detailed analyses are presented in the report. However, insurers have not yet been able to submit to the board for analysis their raw data for 2000. When this work has been completed, a supplementary report will be provided by the board, which will also examine further the area of commercial motors, as well as providing any available indications of the effect that the introduction of the euro has had on premium charges and related matters.
The report confirms evidence that young male drivers aged 17 to 20 years with provisional licences produce very substantial insurance losses. They are involved in accidents resulting in most serious claims at a frequency disproportionate to their representation as policyholders. There is also evidence that charges for young female policyholders are not justified by their claims costs. These policyholders have been described by insurers as "subsidisers". The matter has now been acknowledged by the insurance industry and I am informed that this has already converted into reduced quotations for some young female drivers.
The board notes the complaints it received in written submissions from senior citizens and consumers with disabilities and predicts that, on the basis of demographic projections, the problems associated with insurers declining a risk on grounds of age, currently faced by young drivers, may in future be experienced by people who have retired. The report indicates that the consequences of uninsured driving are becoming more acute and the Motor Insurance Bureau of Ireland now estimates that they add 8% to the cost of claims in the aggregate motor insurance market. However, unlike other businesses, a substantial proportion of expenditure declared by insurers relates to reserves established to meet claims which will not be paid for many years.
The board does not consider that the market for private motor insurance is competitive. The fact that motor insurance is compulsory means that it differs from other products or services, since there is a limit to the usual market forces dictated by consumers, who may decide not to purchase or elect to substitute cheaper alternatives. The real choice available to the Irish consumer is dominated by a handful of legal entities, with three companies accounting for 67% of the entire market. The board states it has become aware of a practice, which it believes should not be permitted, of motor quotes being refused unless the proposer has his or her household or other insurance placed with the insurer.
The board is of the view that the imperfect state of the market is such that consumers' concerns are unlikely to be allayed without an investigation by the Competition Authority, which has the benefit of procedures not available to the board. In the meantime, the board counsels against consumer inertia and advises that it is absolutely essential to shop around before renewing insurance in order to obtain the most competitive quotation as charges between companies can vary by 200% for the same risk.
As the report makes clear, the free movement principle in European Union law means that no citizen can be compelled to purchase insurance from a particular provider or in particular circumstances. Equally, the pricing and underwriting of insurance are matters for individual companies and EU law has always prevented the Government from intervening to freeze, reduce or increase prices. According to the report, a major disparity with the rest of Europe is the fact that in the United Kingdom and Ireland motor insurance is based on driver use rather than on the vehicle, with usage being secondary to issues of cover. The report recommends aligning the position in Ireland with that of mainland Europe through appropriate amendment to the Road Traffic Acts.
The board recalls the continuing concern, which it has expressed, that an appropriate balance be struck between the rights of consumers and the objectives of solvency supervision which, until now, has been assigned the overwhelming priority. In this context, the report refers to the daunting task facing the Irish Financial Services Regulatory Authority, a body cleared by Government and about to come into operation, in regulating general insurance in the best interest of consumers. The report recommends that when IFSRA assumes responsibility for motor insurance, a framework of general insurance standards should be established incorporating the principle of good faith dealing.
The board believes that consumer knowledge of comparative prices could be facilitated by a consumer information service provided electronically by the IFSRA, which would set out illustrative tables for standard motor insurance for a range of common driver profiles. The Government's intention to establish a statutory office of ombudsman within the IFSRA is welcomed by the board, provided the statutory provision will not mirror the unsatisfactory state of affairs under the industry's ombudsman scheme, where the greatest proportion of non-life complaints relate to motor insurance and the vast majority fall outside the industry ombudsman's remit.
At the heart of all the 67 recommendations in this outstanding report is the question of balance between the complementary interests of the citizen and the insurer. On the one hand, policyholders must be satisfied the system is being managed efficiently and is fulfilling its primary function, namely, that of cost-effective delivery of compensation to genuine victims of accidents. On the other hand, there needs to be a healthy, vibrant insurance industry which is capable of competing in Europe in a cost-effective way. Ulti mately, the policyholders pay all claims. There must be a balance between those who attempt to allege injuries or exaggerate claims and those policyholders who are wrongly sued and who are entitled to have their constitutional rights upheld.
Up to now the focus has been virtually entirely on the regulatory end of the sector. There needs to be a balance between prudential supervision and consumer protection, including accountability and transparency, which will arm consumers with the relevant information. I have had an annotated version of the recommendations prepared, a copy of which can be found at www.entemp.ie/cr/miab.pdf. For ease of reference, the annotated document extracts the 67 recommendations from the report and in each case indicates the issues addressed and the body responsible for their implementation. The Government is fully supportive of the broad thrust of the recommendations and has every confidence that their implementation should result in a fairer system for everybody.
In broad terms, the potential for reduction in insurance costs, arising from the implementation of the many recommendations, should impact favourably on the viability of enterprises and on job opportunities for young people. The availability of affordable motor insurance to run a private vehicle would contribute significantly to the economic and social well-being of people living in rural communities. Potential savings in the overhead cost of delivering compensation, which would have a favourable impact on the cost of all types of liability insurance, have been identified in the report. Implementation of the recommendations in the report overall would, therefore, have a beneficial impact in this area which is of particular concern to SMEs. I assure the House that there will not be any delay in preparing an action plan for implementation. The Government has mandated me to set up a high level implementation group to immediately progress the recommendations and to report to Government not later than three months from the inaugural meeting of the implementation group.
The implementation group which met for the first time yesterday, Wednesday, 24 April 2002, is chaired by the Assistant Secretary of the insurance and company law division of the Department, Mr. Corcoran. It is representative of the Departments of Enterprise, Trade and Employment, Finance, the Environment and Local Government, Justice, Equality and Law Reform and Social, Community and Family Affairs, the Consumers' Association of Ireland, IBEC and the MIAB chair, Ms Dorothea Dowling. The membership of the implementation group includes representatives from those Departments which will be primarily responsible for giving effect to the recommendations. Where the Department of Enterprise, Trade and Employment is concerned, 17 of the 67 recom mendations relate directly to us. Without wishing to pre-empt the outcome of the work of the implementation group, I am prepared to accept those 17 recommendations in principle.
In three cases, Nos. 39, 59 and 60, primary legislation would be required and in six cases, Nos. 9, 13 to 16, inclusive, and 19, secondary legislation would be required. I must now examine how best to give effect to recommendations Nos. 29 to 33, inclusive. Of the remaining three, I expect that the declined cases committee should meet on recommendations Nos. 20 and 21 to agree the necessary changes on an administrative basis. Action would not appear to be necessary in relation to recommendation No. 64 on the basis that the issue has been addressed, albeit in a different way, in the Competition Act, 2002.
In response to recommendations Nos. 13 and 14, I am pleased to inform the House that I will, with full Government approval, introduce new regulations requiring insurers to give adequate and proper notice of the terms of the annual renewal of each individual's motor insurance policy in the future. That will mean that the consumer-motorist will receive at least 15 days written notice of renewal terms, along with an official certificate of no claims bonus showing each individual's record of accident free driving up to the date of issue of the new certificate. I have already this week forwarded the draft regulations to the Attorney General's office for his approval. Many consumers become totally frustrated, as they do not get enough notice of the terms of the renewal of their motor insurance. Such late notice is an obstacle to the consumer's ability to shop around, at least for those who have a choice of service provider. These new regulations are part of a framework of supports which I have endeavoured to put in place to empower consumers. I urge all consumers to shop around when renewing their motor and other insurance. These regulations, when brought into force, will assist consumers to do that and I will ensure they legally get that choice.
As mandated by the Government, I have referred the report to both the Competition Authority in relation to recommendations Nos. 41, 65 to 67, inclusive, and the Equality Authority in relation to recommendations Nos. 6, 9 to 11, inclusive, and 45 to take any necessary action thereon. The Government has also approved referral of this report by me to the Irish Insurance Federation for its immediate response to the ten recommendations where responsibility for implementation lies with it. These are shown at pages 11, 13, and 24 to 26 of the annotated version of the recommendations. I am happy to inform the House that the board has agreed to my proposal for a six month extension of its remit up to 31 December 2002. The extension, which has the approval of the Government, is designed to enable the board not just to prepare the sup plementary report, which I mentioned earlier, but also to monitor and report on progress on its many recommendations in the report. I also confirm that both the implementation group and the Motor Insurance Advisory Board will hold joint discussions on the report on 2 May.
My Government colleague, the Minister for the Environment and Local Government, Deputy Dempsey, is responsible for implementing eight of the recommendations of the Motor Insurance Advisory Board report. The publication of the MIAB report is timely in that it follows the recent passage through the Oireachtas of the Road Traffic Act, 2002. That Act contains a range of measures to be delivered within the policy parameters established in the Government's road safety strategy. That strategy presented for the first time a co-ordinated approach to the pursuit of specified goals in relation to road safety nationally. It set challenging targets in terms of reducing road deaths and serious injuries and it is clear that, as a result of the pursuit of the policies set forth in the strategy, significant progress has been achieved in realising those targeted goals. However, the strategy must be seen not just in the context of those targets. Its greatest strength is the fact that it promoted a serious of policy initiatives which will encourage a changed approach to driving and the need for a greater appreciation of safety.
There is clear evidence that the commitment of the Garda in carrying out its enforcement role has yielded results. Detections for drink driving in 2001 were 53% higher than in 1998, while on-the-spot fine notices for the non-wearing of seat belts, introduced in 1999, were issued in respect of 59,000 people in 2000 and 64,000 people in 2001. On-the-spot fine notices for speeding offences issued in 2001 are 165% higher than in 1998.
The provisions of the Road Traffic Act, 2002, will further augment and support the enforcement of traffic law. The introduction of penalty points, the replacement of the on-the-spot fine system with the more structured and certain system of fixed charges and the extended use of cameras to assist in the detection of offences will help to promote further the precautionary approach to driving that will lead to sustained improvements in road safety. As regards the use of cameras for unsuspecting motorists, the cameras are only temporarily fixed in specific locations. They are moved at irregular intervals to ensure we cover all the national routes. The Act will also specifically extend the preliminary breath testing of drivers where they are involved in a road accident or a breach of road traffic law, provide a framework for implementing the European Convention on Driving Disqualifications, which permits the imposition by member states of driving disqualifications for offences committed in another mem ber state and increase certain financial penalties for road traffic offences.
There is no reason that Ireland should not rank among the best states in Europe in terms of road safety and the new Act, together with the application of the other initiatives in our strategy, will progress our realisation of that goal. The driver theory test has been operational since 11 June 2001, and tests knowledge of topics such as the rules of the road, risk perception, hazard awareness and good driving behaviour. This test should encourage a deeper understanding by novice drivers of information and behaviours that will assist them to become safer drivers on the roads of Ireland.
In relation to the driver testing service, I am pleased to say that we have met our customer service target of 10 weeks. This is a major performance by the Government. The resources made available have reduced the average waiting time for a driving test from 18 months when the Government came into office to 10 weeks or less. The insurance industry gave a firm commitment that, if the Government delivered on that, it would deliver on huge premiums. The industry response is awaited. This is a significant achievement in the face of a continuing and unprecedented high level of demand for the service and is the result of significant additional resources which have been allocated to the driver testing service by this Government during its time in office.
The recommendations in the report call for the introduction of a road safety and driver education syllabus in schools. The question of introducing such a syllabus into schools is a matter for my colleague, the Minister for Education and Science, and is currently being examined by the National Council for Curriculum Assessment which has commissioned a study of this very important issue. In the area of driver education generally, the National Safety Council has launched special educational programmes for both primary and secondary schools, and major publicity campaigns targeting drink driving, seat belt wearing and speeding have been produced.
A number of the recommendations in the report deal with the relationship between compulsory motor insurance requirements in this country and the four EU directives on the topic. The particular recommendations make a number of salient points about ways in which the position of victims of road accidents might be improved. The Department of Environment and Local Government is working on the implementation of the EU Fourth Motor Insurance Directive at present and this provides a good opportunity to look at new ways to implement more quickly the recommendations in question.
Some of the recommendations will need to be explored further by the implementation group before they can be acted on, for example in relation to the recommendation that a car could be confiscated if the driver is not covered by insurance. It may well be that the existing legislation provides sufficient authority for official seizure of a vehicle. Similarly, the right of an injured party to proceed directly against the other party's insurance company seems to be substantively provided for in the Road Traffic Act, 1961, which is now over 40 years old. The question of whether the vehicle or the user should be insured is raised in the MIAB report. As the report records, there are a number of significant cost and liability concerns in such a change. These will have to be explored by the implementation group before a decision can be made on such a fundamental alteration to insurance law in Ireland.
My Government colleague, the Minister for Justice, Equality and Law Reform, is responsible for implementing 16 recommendations, some of which have been overtaken to an extent by recent events. One example of this is recommendation No. 42, which is to the effect that the legislation on accrual of 8% interest on legal costs from date of trial should be revised in a manner consistent with the Prompt Payment of Accounts Act, 1997, with a significantly reduced rate of interest and a reasonable period allowed from the date of bill presentation for payment or the resolution of legitimate queries. This is very important.
Section 30 of the Courts and Court Officers Act, 2002, responds to this recommendation in that it provides for changes in the manner in which the interest on costs associated with judgment debts is calculated. In particular, it provides for the application of a rate of 2% per annum from the date a judgment is given to the date when the parties agree costs as between themselves, or the date a certificate of taxation issues, whichever is appropriate. Thereafter, the interest applicable to judgment debts, which is 8%, will apply to the outstanding costs until that amount of costs is fully paid. I am aware of the view of the Motor Insurance Advisory Board, expressed in its report, that no interest should be payable until a reasonable period has expired after presentation of the solicitor's bill, but it must also be acknowledged that the changes made by the Courts and Court Officers Act, which are already in force and which apply even where the proceedings in question were instituted before the Act was passed, represent a considerable improvement on the position up to now.
As regards the continued application of an 8% interest rate to legal costs after they are agreed by the parties or determined either by the Taxing Master or the county registrar, while this rate may appear high by reference to interest rates generally, it must be borne in mind that the charging of interest has the purpose of encouraging prompt payment by the liable party. A further recommendation which has been responded to in part is recommendation No. 43 to the effect that the draft legislation on advertising by solicitors should be progressed. In fact, this legislation, the Solicitors (Amendment) Act 2002, was enacted just two weeks ago.
The provisions on advertising require a commencement order, which the Minister for Justice hopes to make shortly. This recommendation and recommendation No. 44 propose a requirement that all advertisements by solicitors quote a summary of section 68 of the Solicitors (Amendment) Act, 1994, which provides that solicitors are prohibited from calculating their charges as a percentage of any damages that become payable – this is critical. The Minister, Deputy O'Donoghue, is of the view that it would be of benefit to draw the attention of the public to this important rule as its existence may not be widely known. It is important that we constantly bring this to the attention of the people.
Recommendation No. 57 is to the effect that the Courts Bill should be amended so as not to increase the civil jurisdiction of the Circuit Court and District Court beyond expressing the existing figures in convenient euro amounts. In fact, this Bill is now an Act, the Courts and Court Officers Act, 2002, but requires a commencement order to raise the jurisdiction limit of the Circuit Court from £30,000 to €100,000, and that of the District Court from £5,000 to €20,000.
The Minister believes that increased jurisdiction limits do not necessarily mean increased claims and increased damages awards. He believes there is a strong case for revising the limits. Consumer prices have risen by about 30% since the limits were previously set in 1991. Inasmuch as damages compensate for such elements as loss of earnings, more expensive vehicles etc. which reflect rapid real economic growth, it could be argued that consumer price inflation does not fully mirror the increase in damages over this period. This means that leaving jurisdiction limits unchanged would have the effect over time of pushing cases of a given level of seriousness into higher courts, with higher costs and negative implications for access to justice for all. The increased jurisdiction will also enhance access to justice in the sense that the District Court and Circuit Court are courts of local jurisdiction, located conveniently to those members of the public who need to have recourse to them. Having said that, the general jurisdiction provisions in the Act will not come into force until the Minister has made a commencement order to that effect.
The mechanics concerning the establishment of the Personal Injuries Assessment Board, which should have a significant impact on the number of cases that go to court, is well advanced. It is planned to co-ordinate, in so far as it is feasible, the commencement of the jurisdiction provisions with the coming into operation of the PIAB.
There are a number of recommendations in the report which require consideration by the Courts Service. In this regard, it is understood that the board of the Courts Service has decided to table consideration of the report of the Motor Insurance Advisory Board at its next meeting. I am pleased with this and see the Courts Service having a crucial role in exposing rogue claimants who create a major problem and compound the situation for everyone. Their views on such matters as specialist judges, an extended role for the Small Claims Court and the introduction of a book of quantum should be interesting and enlightening. The Minister has promised to act quickly on any recommendations that he gets from the Courts Service for legislative amendment. The Minister's record shows that he has put through a greater volume of legislation, Bills culminating in Acts, than any of his predecessors and, cumulatively, more than many of his predecessors combined.
In recommendation No. 47, the Motor Insurance Advisory Board proposes that stringent measures be introduced to tackle fraudulent and exaggerated claims with a loss of all compensation entitlements and appropriate criminal sanctions. It will be necessary for the Government to consider carefully any measures in this area.
In recommendation No. 50, the MIAB proposes that the system of lump sum compensation payments be reviewed on the basis that the long-term needs of the seriously injured may be better served by guaranteed annual payments. Recommendation No. 51 is that a system should be introduced to facilitate pre-trial interim payments to the seriously injured in cases where liability is not a substantial issue, but there is a financial need to replace lost earnings or seek medical treatment. Recommendation No. 52 proposes the introduction of awards of provisional damages where there is a substantial risk that the injured party's medical condition may deteriorate in the future.
These three recommendations concern issues which were the subject of a 1996 report of the Law Reform Commission. Its recommendations have not been addressed by the Department of Justice, Equality and Law Reform to date due to the substantial programme of legislation in which it has been engaged over the past five years in particular.
In brief, the Law Reform Commission proposed a system of structured settlements to replace the award of damages in the form of lump sums and that there should be provision for both interim and provisional awards, with certain conditions. Significantly, however, the commission recommended no change in the way awards of damages are calculated by the courts. In other words, these changes would perhaps deliver compensation in a more appropriate way, while being neutral in their effect on the aggregate amount of compensation paid in the long term.
Much comment has been made, both before and after the publication of the MIAB report, on the role of the legal profession in relation to litigation and insurance costs. It is of significance here that the Government, as part of its response to a report by the OECD on regulatory reform in Ireland, which was published in April 2001, asked the Competition Authority to undertake a study of professional services. Among the professions which are being studied by the Competition Authority is the legal profession and we await its report with interest.
In common with every Member of this House, I have been concerned for some time about the high cost of motor insurance, particularly for young drivers. I do not pretend that this report provides some sort of quick-fix solution which will immediately bring about significant reductions in insurance premiums but the report provides a road map which will enable us to address a state of affairs which is unsatisfactory and of long standing as well as being a cause of considerable public disquiet.
I promise, therefore, a commitment on the part of myself and my Government colleagues to ensure that the necessary action is taken to give effect to the many recommendations contained in this report. I firmly believe that these 67 wide-ranging recommendations chart the way to a system of insurance that is fairer for all and more equitable in terms of the relationship between the risk and premium paid by the user. They signpost the way ahead to make the system serve the 21st century consumer.
I believe that the issues involved will have to be tackled without delay and I wasted no time in establishing the implementation group to oversee our response to this report. My intention is that the comprehensive action plan to be prepared by the implementation group will be presented to Government and then published in the interests of transparency and public information.
I am sure the House will join me in wishing the implementation group every success in its task of bringing this work to the next stage. Both the group and the Motor Insurance Advisory Board will continue to have my full assistance and support. I feel sure that this historic report from the Motor Insurance Advisory Board will be the catalyst for effecting positive change for motor insurance in Ireland in the years ahead.