Thursday, 11 March 2004

Questions (4)

Denis Naughten


4 Mr. Naughten asked the Tánaiste and Minister for Enterprise, Trade and Employment the action she is taking to introduce competition into the insurance market; and if she will make a statement on the matter. [8152/04]

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Oral answers (7 contributions) (Question to Minister for Enterprise)

One of the key elements of the insurance reform programme the Tánaiste launched on 25 October 2002 is to investigate competition in the Irish insurance market with a view to establishing what actions are needed to improve competition.

The aim of the joint study undertaken by the Department and the Competition Authority is to identify and analyse barriers to entry and limitations on rivalry in the insurance marketplace. The bulk of the study was completed in 2003 and a preliminary report and consultation document on competition issues in the non-life insurance market was published on 18 February 2004. Following a two-month consultation period, a final report will be published which will contain recommendations based on its findings.

The insurance reform programme mentioned above contains a wide-ranging set of insurance reforms that have the potential to make the Irish market generally more attractive to insurers, thus encouraging the entry of new players into the market and leading to downward pressure on premia. Improvements in the functioning of the Irish insurance market will reduce industry costs and make the market more attractive to other firms that have not had any previous presence in Ireland. Competition has a vital role to play in ensuring that these cost reductions are fully passed on to the buyers of insurance.

Many of the other measures contained in the Motor Insurance Advisory Board's 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 to promote 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 assist consumers who wish to shop around; the provision of comparative tables of insurance quotes which IFSRA now publishes on its one-stop website on a three-monthly basis; and the incorporation of the principle of acting against the public interest in the Competition Act 2002.

Codes of practice in the insurance industry, IFSRA and the IIF, 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 any more formalised measures which may be adopted by IFSRA under competition law.

The Competition Authority has a duty to review all further insurance mergers in the interests of the economy, with appropriate reference to IFSRA. The process of consultation seeks to protect the interests of specific policyholder groups, since the effects of mergers may warrant consideration below issues of the market as a whole.

Additional information not given on the floor of the House

Over the coming months, I intend to meet representatives of potential new entrants to the market. I have made it known that I am interested in talking to any such potential entrants.

I thank the Minister of State for his response but it does not seem to address the fact that there is no competition within the marketplace. I have received an e-mail from a young man who sought insurance cover for a Fiat Punto and received a quote of between €3,500 and €5,700, which is more than the cost of the car. Owing to the lack of competition, cherry-picking is taking place in the market and young people are being persecuted by the insurance industry which does not want to take them on. Competition is badly needed.

Why have all 67 recommendations of the MIAB, which were launched with such fanfare as the answer to insurance problems, not been implemented? How many of them have been implemented and when will the rest be implemented? Costs have fallen for the insurance industry because road deaths have decreased by more than 25% in the last five years. The industry's input costs have fallen, yet that reduction has not been passed on to young drivers who are most vulnerable in this respect.

I do not accept the criticisms levelled by the Deputy. Some 32 of the 67 recommendations contained in the MIAB's report have already been implemented.

Four of them have been partly implemented and a further 21 are being actively progressed. The Deputy is well aware of the progress that is being made across the spectrum as a result of legislation introduced by the Minister for Justice, Equality and Law Reform, as well as by the work envisaged for the PIAB which is about to be established. There is clear evidence that premium prices are being reduced by up to 32%. While we all accept that reductions are not happening as widely or as quickly as we would wish, it is clear that significant reductions are taking place and a number of companies have reduced premia considerably.

The case the Deputy mentioned is evidence of the wide gap between what companies are quoting and it indicates that competition is becoming more effective. While the Tánaiste and Minister for Enterprise, Trade and Employment is satisfied that there is still a considerable way to go, we are making progress in that respect.

Would the Minister of State accept that the only way real competition can be achieved is by having a single European insurance market? Will he outline what measures have been taken by the Government to achieve that?

While there is an argument for such a market, the European and domestic situations are quite different. That is one of the issues concerning insurance companies that is being addressed currently within the ambit of European competition law. For instance, data sharing, which is allowed under European competition law, is not provided for here. That is an example of where we need to make further progress and which will bring about an improvement in competition.

Question No. 5 lapsed.