I welcome the opportunity to address the Seanad today on the Central Bank (National Claims Information Database) Bill 2018, which was published on 10 July 2018. This Bill seeks to provide the legislative basis for the Central Bank of Ireland to establish and maintain the national claims information database which was recommended by the cost of insurance working group in January 2017. Its essential purpose is to improve data availability in the motor insurance area. It is also proposing to amend sections 8 and 14 of the Civil Liability and Courts Act 2004.
As Senators are aware, the cost of insurance working group was established by the Minister for Finance in 2016 to examine the factors contributing to the increasing cost of insurance and to identify what measures can be introduced to help reduce this cost, taking account of the requirement that we maintain a financially stable insurance sector. The result of that examination was the publication of the report on the cost of motor insurance in January 2017, with 33 recommendations for implementation. Subsequently, the report on the cost of employer and public liability insurance, with its 15 additional recommendations, was published in January 2018. Both reports contain recommendations targeted at improving the insurance sector generally. It is important to say that a key conclusion of the working group was that there was no single policy or legislative silver bullet to stem or reverse immediately significant premium price rises. This was also recognised by the Oireachtas Joint Committee on Finance, Public Expenditure, Reform and Taoiseach, which reported on the issue in late 2016.
One of the key themes which emerged from the discussions of the working group was that an improvement in transparency, through the additional collection and publication of data, was essential. The cost of insurance working group therefore recommended the establishment of a national claims information database on a legislative basis to facilitate a more in-depth analysis of annual trends in motor insurance claims. This was seen as key to developing an understanding of how claims costs are impacting premiums, in particular understanding the relationship between the price paid by a customer for motor insurance and the cost to insurance undertakings.
In making its recommendation, the cost of insurance working group felt there was a need to take a practical approach to the establishment of a database. In other words, in broad terms it should be trying to achieve the following: provide key aggregate data around how the market is operating at a particular time, be relatively simple to construct at the outset, be cost-effective, be capable of being put in place relatively quickly, and have the capacity to expand and deepen its scope and range over time.
In considering this matter, the working group took into account the type of data collected in other jurisdictions to see if there was a precedent upon which it could build its database. Consideration of the cost dimension was also important as ultimately the database will be paid for by the insurance industry which will pass the costs onto policyholders. Relative simplicity was deemed an important quality because insurers do not always collect data in a consistent way. Therefore, the database needs to be sufficiently broad at the outset to cater for a slight variation of approaches. Over time this can be improved as insurers standardise the way they provide data. In summary, the working group took the view that a database built upon the characteristics above was the best way forward.
A subgroup of the cost of insurance working group was established to identify relevant data that could be defined in a consistent manner and devise a practical method for the collection of that data, using these objectives. It was chaired by officials from my Department, including representatives from the Central Bank, the State Claims Agency, the Personal Injuries Assessment Board, PIAB, the Central Statistics Office and the Society of Actuaries in Ireland. This work culminated in the publication of the Bill before Seanad Éireann today.
In parallel, work has been undertaken by the Central Bank in close co-operation with the data subgroup on the finalisation, subject to the passage of the legislation, of a specification document which sets out the specific data that will be required from insurers for the purpose of the database. The progression of the specification in parallel with the drafting of the Bill was seen as necessary to ensure that the database can be operational as quickly as possible following enactment. It also provided a means of signalling to industry certain system changes it may need to undertake to be ready for engagement with the database. I understand my officials circulated briefing material on what would be collected within the data specification to Senators, and I hope this was beneficial in highlighting the level of detail that will be collected upon.
I propose now to give Senators a brief overview of the major sections of the Bill. It should be noted that I will provide a more detailed breakdown on each section on Committee Stage.
Section 4, which covers interpretation, is an important provision because, as well as defining a range of relevant expressions, it also sets out the different settlement channels through which a claim may be finalised. A claim may be resolved directly with an insurer, through the PIAB, or by a court decision. As aggregate industry data are not currently available, for example, on direct settlements, this breakdown was identified as important to allow policymakers to see trends or distinctions in the costs related to these channels and to enable them develop more targeted response measures where necessary.
Section 6 allows the scope of the database to be extended to other lines of non-life insurance in the future on foot of an assessment by the Central Bank of the appropriateness of such extension after consultation with the Minister for Finance. While it is intended in the first instance that the database will focus on the motor insurance sector, it was clear from our consultations that many saw a case to extend the scope of the database in the future to encompass other lines of non-life insurance, such as employer liability insurance and public liability insurance.
Section 8 is the pivotal section of the Bill as it confers the Central Bank of Ireland with the function of establishing and administering the database. It requires the Central Bank to collect and analyse data from insurance undertakings on the income and costs associated with carrying on the relevant class of insurance. It is then required to publish information about those data at least annually. The type of information that can be collected includes data on different types of income, exposure, business expenses, the number and nature of claims, the costs and provisions associated with those claims, as well as the amounts paid in respect of claims resolved in different settlement channels and the costs associated with those claims.
Section 8 also sets out the purposes which the Central Bank’s annual report should meet and includes the following: increasing the level of information around the relationship between the cost of providing insurance and the cost of a premium for the consumer, identifying current and emerging trends within the sector, identifying the factors that cause price movements in the relevant line of insurance, presenting a statistical analysis of income and expenditure associated with providing the relevant type of insurance, and presenting a statistical analysis of information relating to claims and of each particular settlement channel used in respect of such claims.
Section 11 sets out the funding regime for the establishment and administration of the database. This provision is designed in such a way as to ensure that the Central Bank is fully reimbursed for the performance of this additional function. One of the reasons for this is to ensure that the financing of the project does not run contrary to the prohibitions on monetary financing set down by the European Central Bank statutes.
I will touch briefly upon the amendments to sections 8 and 14 of the Civil Liability and Courts Act, 2004, which are covered by section 13 of the Bill.
On Committee Stage in the Dáil, this section was introduced into the Bill in order to implement two key recommendations of the cost of insurance working group's report on the cost of employer and public liability insurance.
With regard to section 8, three changes are being made: the period of notice is being reduced from two months to one month; the wording "or as soon as practicable afterwards" is being deleted as this, it is argued, allows too much latitude for late notification - it is felt that there is already sufficient safeguard in the legislation for a plaintiff insofar as if he or she has reasonable cause for the delay then the court will take account of this; and a court "shall" be required to draw inferences from a failure to notify rather than "may" draw inferences - it should be noted that these inferences are unlikely to be negative if the plaintiff has reasonable cause for a late notification.
A new subsection (4A) is being inserted into section 14 of the Civil Liability and Courts Act 2004. Section 14 deals with the matter of a verifying affidavit in a personal injuries action. At the time this Bill was being legislated for, it was described as a key element of the 2004 Act and was designed to combat false and exaggerated personal injury claims. The working group took the view that the requirement to lodge an affidavit within 21 days of the service of the pleadings was not unreasonable. However, it would appear that this regularly does not happen. Therefore, this new subsection would provide for a court hearing a personal injuries action, where there is a failure to lodge an affidavit in court within 21 days to draw inferences and where it thought it appropriate in the circumstances of the case to deduct costs from the party responsible for the failure. This will have no impact on those plaintiffs and defendants already complying with this legislative rule.
I reiterate the importance of the swift passage of this Bill to ensure that the national claims information database can be established and the Central Bank of Ireland can begin collecting and analysing the data necessary to increase transparency in the insurance sector as soon as possible. Ultimately, the main benefit of the database is the report that the Central Bank will produce, which I believe will become a rich source of information that will benefit policymakers, insurers, including insurers considering accessing the Irish market, and consumers. In general terms, it should make the Irish insurance market more attractive over time.
Another aspect I want to put on the record is that on the issue of the insurance fraud section within An Garda Síochána, I will meet the Commissioner, Mr. Drew Harris, tomorrow morning.