Tuesday, 27 January 2004

Questions (130)

Róisín Shortall

Question:

246 Ms Shortall asked the Tánaiste and Minister for Enterprise, Trade and Employment the action she is taking to address professional indemnity costs to business in this particular sector of the insurance industry; the action she is taking to encourage other insurers to enter this market; and if she is taking other measures to encourage competition in this market. [1711/04]

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Written answers (Question to Minister for Enterprise)

I no longer have responsibility for insurance undertakings. From 1 May 2003, the Irish Financial Services Regulatory Authority, IFSRA, is responsible for practically all of the financial services industry, including the registration and supervision of insurance undertakings and the services by them. I do, however, retain responsibility for the insurance reform programme.

I am aware of serious difficulties being experienced by businesses due to the high cost of insurance. The insurance reform programme that I announced on the 25th of October 2002 is progressing well. This programme comprises a comprehensive set of interrelated measures designed to improve the functioning of the Irish insurance market. The key measures include the implementation of the recommendations in the Motor Insurance Advisory Board action plan within a target timeframe. To date, 32 of the recommendations have been fully implemented, three partially implemented and work is in progress on the implementation of the other recommendations. The measures provide for the establishment of the Personal Injuries Assessment Board. The Personal Injuries Assessment Board Bill 2003 completed its passage through the Houses of the Oireachtas on 19 December 2003 and was signed into law on 28 December 2003. The Act will be commenced in early 2004 providing for the establishment of the Personal Injuries Assessment Board on a statutory basis and allowing the board to deal with cases.

My Department and the Competition Authority are to conduct a joint study into the insurance market. The study will identify and analyse barriers to entry and limitations on rivalry in the insurance marketplace. A significant amount of the work was completed in 2003 and a report will be produced in the near future.

I chair a ministerial committee established to drive the co-ordinated implementation of the reform programme across the relevant Government Departments and other bodies concerned. Substantial progress is being made on a range of measures that will radically overhaul the functioning of the insurance market and help tackle the high cost of insurance. These include measures to reduce the number of accidents, to tackle fraudulent and exaggerated claims and streamline the law in relation to personal injury claims.

The pricing and underwriting of insurance is a matter for individual insurance companies and EU law prevents Governments from intervening in relation to the matter of premium levels or in respect of what risks they are prepared to underwrite. Insurers generally make decisions about whether they are prepared to quote for a particular risk, and if so, at what premium level, based on their underwriting experience or assessment of that risk in the market. Governments are free to take action, which affects the operation of the insurance market. The insurance reform programme has impacted favourably on the insurance market.

There is an onus on the insurance industry to ensure that the measures the Government is putting in place to reform the Irish insurance market will have the effect of significantly reducing the cost of premiums to consumers and businesses. It is heartening to report that a number of insurers have already announced reductions of 15% to 20% in motor and more recently public liability premiums. As implementation of the reform programme continues, I expect reductions to occur in all forms of insurance. I am confident that these measures will attract new players into the market and lead to further downward pressure on premiums.

I am keen to encourage other insurers to enter this market. Improvements in the functioning of the Irish insurance market make it more attractive to firms that do not have a presence in Ireland. Over the coming months, I intend to meet representatives of potential new entrants to the market.

Many of the measures contained in the MIAB recommendations will have the effect of encouraging competition, including those relating to transparency and the provision of information to consumers. Examples of recommendations that have been implemented which are promoting competition include the provision of 15 days notice at renewal time for motor insurance policies, which give consumers the opportunity to shop around; regulations that prescribe that no-claims bonus documentation be provided with renewal notices to assists consumers who wish to shop around; the provision of comparative tables of insurance quotes which IFSRA now publishes on its website on a three monthly basis; the incorporation of the principle of "acting against the public interest" in the Competition Act 2002; codes of practice in the insurance industry now require insurers who refuse to quote for any particular risk to state their reason in writing upon request; the Irish Insurance Federation in its code of practice has agreed a code of conduct with its member companies on anti-competitive behaviour, subject to more formalised measures, which may be adopted by IFSRA under competition law; and the Competition Authority has a duty to review all further insurance mergers in the interests of the Irish economy with appropriate reference to IFSRA, and the process of consultation seeks to protect the interests of specific policyholder groups since the effects of mergers may warrant consideration about issues of the market as a whole.

The joint study by the Competition Authority and the Department of Enterprise, Trade and Employment into insurance will produce a report in the near future. Recommendations resulting from that report will be implemented.