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Dáil Éireann díospóireacht -
Tuesday, 31 May 1988

Vol. 381 No. 4

Ceisteanna—Questions. Oral Answers. - Insurance Liability Provisions.

8.

asked the Minister for Industry and Commerce if his attention has been drawn to the growing concern regarding the inaccuracies in insurance liability provisions by Irish based insurance companies; and if so, the way in which he proposes to tackle the problem.

I am aware of a recent magazine article which expressed concern at the claims provisioning of some insurance companies operating in this country. I would like to point out, however, that the figures quoted in that article could be misinterpreted given that they reflect the gross position on claims, that is, before allowance is made for reinsurance recoveries. Therefore, the increases in the claims provisions referred to do not have a corresponding effect on the companies' net profitability as they are, to a large extent, met by the reinsurers involved. This is particularly so in so far as the more costly third party injury awards and settlements are concerned.

Difficulty in claims reserving in the past can be attributed to a number of factors, which in general either no longer apply or are now being taken into account by insurers. These include high inflation over a number of years, a dramatic increase in claims consciousness and the level of claims awards by juries, and other unforeseen factors outside the control of insurers.

I would like to emphasise that my Department exercises supervisory control over insurance companies and pays particular attention to claims reserves. The strengthening of provisions in the companies' returns referred to in the article came about in a number of cases following action taken by my Department in their insurance supervisory capacity. My Department have also been instrumental in the increasing use of independent expertise by insurers in recent years to assist them in estimating their claims liability and in advising on the appropriate premiums to be charged.

As the Deputy will be aware, the Government are committed to improve the overall environment in which insurers operate and have already taken action to change our court and legal procedures, including the abolition of juries in personal injuries cases. Other measures which are in train include the rationalisation of legal representation, the introduction of a pre-trial procedure system with a view to shortening the length of trials and reducing legal costs, and the establishment of a Book of Quantum of Damages.

I am confident that as well as helping to reduce insurance costs, these measures will also provide a greater degree of certainty for insurers in estimating their future claims liability.

Can I take from what the Minister is saying that he is satisfied, in relation to the liability provisions at present existing, from the information available in his Department in their supervisory capacity, that all is well with the insurance industry and that there is no possibility of a recurrence of what happened in the past five years with two insurance companies in particular?

The supervisory section in my Department constantly monitor the situation, We are satisfied and will continue to monitor the existing situation in the hope that there will not be a recurrence, but then where is the certainty in life? The Deputy might not be here tomorrow and neither might I.

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