Dáil Éireann Debate, Monday - 11 September 2017
187. Deputy John Curran asked the Minister for Finance the steps he is taking to ensure that drivers will see significant motor insurance premiums reductions in view of the fact that motor insurance companies are currently returning profits and that motor insurance premiums have increased excessively particularly in the past three years; and if he will make a statement on the matter. [38200/17]
View answerAt the outset, the Deputy should note that as Minister for Finance, I am responsible for the development of the legal framework governing financial regulation. Neither I, nor the Central Bank of Ireland, have the power to direct insurance companies on the pricing of insurance products. Indeed, the EU framework for insurance expressly prohibits Member States from adopting rules which require insurance companies to obtain prior approval of the pricing or terms and conditions of insurance products. The provision of insurance cover and the price at which it is offered is a commercial matter for insurance companies and is based on an assessment of the risks they are willing to accept and adequate provisioning to meet those risks. These are considered by insurance companies on a case-by-case basis.
In relation to the profit levels of companies providing motor insurance, the Deputy may wish to note that the profitability of the sector is discussed in Chapter 3 of the Report on the Cost of Motor Insurance, which was published by the Cost of Insurance Working Group in January 2017. The Report highlights that the industry made substantial profits between 2005 and 2008 (€2.2bn, of which approximately €1bn related to motor insurance). However, during the period from 2009 to 2015, there were underwriting losses of €1.3bn, with motor insurance accounting for €900m of this. It should also be noted that the low interest rate environment has materially affected the levels of interest or investment income which insurers can earn and has reduced their ability to compensate in part for their underwriting losses.
Therefore, notwithstanding the recent return to profitability for certain companies in the sector, the issue of profitability has been problematic for the industry over the previous number of years, and was a contributory factor to the general price increases experienced by consumers during that time.
As you are aware, this problem of rising motor insurance premiums was the main impetus for the establishment of the Cost of Insurance Working Group in July 2016. The Report on the Cost of Motor Insurance makes 33 recommendations with 71 associated actions to be carried out in agreed timeframes, which are set out in an Action Plan.
Work is ongoing on the implementation of the recommendations by the relevant Government Departments and Agencies and there is a commitment within the Report that the Working Group will prepare quarterly updates on its progress. The second such update was published on the Department's website on 21 July 2017 and shows the progress to date on the overall implementation of the recommendations, with a particular focus on the 17 action points which were due for completion in the second quarter of 2017. All 17 of these action points have been completed by their deadline. Substantial work has also been undertaken in respect of the nine action points categorised as “ongoing”. The third quarterly update will issue in the coming weeks.
I believe that the implementation of the Report on the Cost of Motor Insurance will make a difference to the pricing of insurance premiums over the next 18 months. It is envisaged that the implementation of all the recommendations cumulatively, with the appropriate levels of commitment and cooperation from all relevant stakeholders, will achieve the objective of delivering fairer premiums for consumers. I also believe that the Setanta judgment, by finding that MIBI is not liable to meet third party claims, removes a major uncertainty from industry, which I would expect to be reflected in pricing in the short to medium term.
It should be noted that the most recent CSO data (for August) indicates that private motor insurance premiums have reduced by 14% year-on-year. While the CSO statistics indicate a greater degree of stability on an overall basis, these figures represent a broad average and therefore there are many people who may still be seeing increases. I am hopeful that greater stability in pricing will continue to occur, and that premiums will continue to fall from the very high level of last year.
