Vol. 316 No. 10
asked the Minister for Industry, Commerce and Energy the average increase in motor vehicle insurance premiums sanctioned by the Government since 1 March 1978 the justification, if any, for such an increase, and the estimated increase in the Consumer Price Index from mid-February 1978 to date.
8.
asked the Minister for Industry, Commerce and Energy if, in view of the decision of the Government to sanction increases in motor vehicle insurance premiums from 1 March 1978 of 61 per cent to 80 per cent per annum, he would now set up a State-sponsored system to provide an alternative insurance cover for motorists.
With the permission of the Ceann Comhairle, I propose to take Question Nos. 7 and 8 together.
I am not convinced that, in the circumstances of the Irish market, a State-sponsored motor insurance scheme would have the effect of reducing the rate of premium increases.
There are 25 authorised motor insurers in Ireland and I recognise that one company, through the operation of market forces, has grown to hold a large part of the market for private motor insurance but the share held by many other insurers is quite significant. I consider that the interests of the motorist are best served by trying to ensure that an open active competitive market in motor insurance is brought about.
In 1978 the increases in motor insurance premiums approved were: (a) in respect of one insurer of motor cycles—18 per cent; (b) in respect of ten insurers of cars and commercial vehicles—average increases of from 5 per cent to 35 per cent.
Within the overall limits of the increase in premium income to arise in each case from these average increases, each company was allowed to vary the rates of increase as between the different sectors of its motor premium account.
In 1979, the increases approved were: (a) in respect of one insurer of motor cycles—30 per cent; (b) in respect of nine insurers of cars and commercial vehicles—average increases of from 10 per cent to 26 per cent.
The spreading of the average increases at varying rates between the different sectors of the companies motor premium accounts was again permitted.
Because the third-party element represents the greatest risk and attracts the heaviest claims, the application of the average increases at varying rates to the different sectors resulted in increases in third party insurance higher than the overall average increases permitted to the companies. Thus, the increases in third party rates ranged in 1978 from 5 per cent to 50 per cent and in 1979 from 10 per cent to 31.5 per cent. Where the policy provided more than third-party cover the increases were less than the average permitted and in some cases there were decreases in respect of the rates for fire-and-theft and accidental damage.
The increases approved were necessary to enable the motor insurers concerned to offset continuing and increasing losses arising on the underwriting of motor insurance risks. These losses arose directly from the continuing growth in the cost of claims which rose by 28.4 per cent in 1977 and by 41.8 per cent in 1978. In considering the rate of increase in motor insurance premiums I regard the consumer price index as having a very limited value indeed. The increases in premium income for any year must take into account the full estimated cost of settling all claims then outstanding, or to be incurred, over the following two to five years on current policies.
Is the Minister aware of the very considerable public concern about the relative efficiency and the underwriting practices of the motor vehicle insurance industry generally? In these circumstances will the Minister agree to institute some investigation, even at departmental level, into the merits or otherwise of setting up a State-sponsored system which would give absolute security and would be infinitely more efficient and effective than the current rather questionable system we have in operation?
Starting a national insurance company would not ensure that premium rates would be kept to a minimum because the reason for most premium rates being so high is the cost of claims. In the past the Minister stated publicly that he questioned the feasibility of assessing claims without juries because this would probably limit the amount of damages which would be awarded thereby keeping premiums at a low rate. Having a national insurance company, without this being done, would not ensure that people would get lower rates.
Would the Minister agree that, irrespective of the anomalies of the jury system of claims, if that basic reform was undertaken all the indications are that the insurance companies would proceed to- look for further massive increases? When one contrasts the operations of the industry with, for instance, the VHI there is a glaring deficiency and failure on their part to provide reasonable insurance for motorists at a reasonable cost.
The Minister already said that he has nothing in principle against the setting up of a State sponsored system of motor insurance but that until such time as we have worked out a scheme which would justify such a fundamental change in our market economy in that area it is considered that the best way of ensuring a competitive market is to consider the means whereby the cost of claims can be reduced.
Is the Minister satisfied that there is adequate competition in the industry at present? Is the Minister also satisfied that there is not a gentleman's or lady's agreement between the companies about the premiums? Is there genuine competition in the industry?
Neither the Minister nor anybody else could be ever satisfied that there is enough competition and we do everything we can to encourage competition.
The premiums are decided between the companies.
I am not aware that that is so.
In the light of a recent admission that there is a monopoly within the industry, can the Minister justify the approval of a 40 per cent increase to one company which diversifies into loss making activities together with insurance?
That is a different question that has to do with other things as well as insurance.
They got a 40 per cent increase approved by the Department.
The Minister introduced the topic of jury awards as distinct from awards in accident cases found by a judge sitting by himself. Is the Minister contemplating a change in the law in this regard so as to cater for this type of case under a judge without a jury merely because it will result in lower awards to the plaintiffs——
The Deputy is anticipating legislation.
——and without regard to the question of whether the awards are just or not?
I did not say that.
That came through very strongly from what the Minister said. It is a typical example of the way in which the Minister operates.
The Minister gave figures for the increase in claims in two years. What was the increase in premium income at existing rates in the same two years?
In relation to the increases sanctioned the motor insurance companies were allowed to vary these increases over the various policies, third party fire and theft, accidental damage or full comprehensive insurance. In the case of full comprehensive insurance in many cases there were decreases in premiums. I only have the percentage increases, not the actual figures in monetary terms, because the figures vary so much from one company to another.
Would the Minister appreciate——
The Deputy might put down a separate question.
——that when she gave us figures for the increases in claims the issue relevant to the increase in premiums is whether the premium income at existing rates did or did not meet those additional claims, or how far it fell short? I presume that there was an increase in income. The question is: How big is the gap? That information which I am seeking is the only relevant information to increases in rates.
I can arrange to have the information sent to the Deputy.
