Deputy Gay Mitchell has been given permission to raise the matter of the circumstance of drivers, especially young drivers, who have to pay increasingly large insurance premiums, despite not having any claims against their insurance policies.
Adjournment Debate. - Motor Insurance Costs.
I wish to express my thanks to the Ceann Comhairle for choosing this matter for the Adjournment Debate. I want to highlight the dreadful circumstances of drivers, especially young drivers like the person in my constituency who paid third party, fire and theft premiums of £877 in 1989, £1,299 in 1990 and £1,960 in 1991 on the same car, without any claims whatsoever. This is an outrageous demand for an insurance company to make on somebody who has not had a claim. The charge has almost tripled between 1989 and 1991 on a man who has shown that he is a capable and careful driver who does not abuse his insurance cover. Unfortunately this man, who happens to be 22 years of age, is not alone in this problem. His car is a 1982 Opel Kadet the value of which is not very high. He finds himself, in common with a number of young people of his age, either not able to get a quote or only getting quotes which are beyond his means and those of his family to meet.
People here are paying to the same companies twice or three times as much for basic insurance cover as people in Northern Ireland or Britain. I find this hard to understand, particularly given the strife there has been in Northern Ireland for more than 20 years.
Our response to this problem has been to be inactive in Government and as a House not to come to terms with alleviating the problems of drivers, especially young drivers, who are paying through the nose for car insurance. We tried to ease the problem by abolishing juries in certain circumstances. I pointed out in this House that the sub-committee on motor insurance costs which I chaired made an interim report which recommended that no such abolition should take place until such time as the Irish Insurance Federation gave an undertaking that the costs of car insurance would come down. They were not in a position to give that undertaking but were canvassing hard for the abolition of juries. The House went ahead with the abolition of juries and we have seen that the cost of insurance has not come down. The federation said in evidence to the sub-committee that within five years the cost of insurance would decrease. We said we did not believe there would be a reduction and we have been proven right.
We have also sought a unilateral EC derogation for the insurance industry after 1992. Why should we seek such a derogation? Is it not time this House looked at the needs of the consumer? The insurance industry is in the business arena. Their objective is profit and they should be able to operate in the marketplace without the sort of protection they are getting and they should not be able to rip off this young man and people like him who cannot get reasonable motor insurance cover. Why should we seek a derogation for the insurance industry after 1992? Why should not somebody from Dublin be able to go to Belfast, Cardiff or London for a quote since companies from those places come here to do business? It is scandalous that the Government and this House continue to uphold a situation where the insurance industry is being protected from competition while young drivers and others not so young cannot get cover at a reasonable cost.
The Minister for the Environment talks about the problem of uninsured drivers. Many young people are not very experienced and sometimes they do not realise the very serious consequences of driving without insurance. If they could somehow have an opportunity to show their civic mindedness by being given some cover for the vehicles they are driving for insurance purposes a large number would avail of it. In other words, we are putting people into situations where they are unable to get cover and for that reason are driving cars without insurance. This is just one more example of a section of the business community who are not being taken on and who are indicating in their accounts that they really are not making money out of this, they are making money from investments. They cannot make money from investments without taking it in in premiums in the first place. I ask the Minister to take them on, let us forget about this derogation and give all drivers, particularly young drivers, an opportunity to get a quotation which is half way reasonable or decent for car insurance.
I would like to remind both the Deputy and this House of what the Minister for Industry and Commerce said on numerous occasions over recent months, in that, as the insurance supervisory authority, he has a responsibility to ensure that insurance companies meet their statutory solvency and reserve requirements. The Government do not, therefore, have responsibility for the day to day operations of insurance companies. The right of insurance companies to make their own underwriting decisions in the light of their particular circumstances and assessment of the market must be respected. In the case of motor insurance there is, of course, a legal obligation on all motorists under the Road Traffic Acts to have minimum third party insurance. However, no legal obligation can be placed on any individual insurer to quote in respect of any risk, to quote at any particular premium or to quote in any particular manner.
The price of insurance, including motor insurance, in this country, as indeed in any other market is directly and substantially dependent on the frequency of claims and the cost of settling those claims. In 1988, insurers sustained underwriting losses of £48 million on their motor portfolios. The corresponding figure for 1989 was £116 million and losses for 1990 are expected to be similar to the 1989 figure. Confronted with losses of this magnitude and in order to maintain their viability insurers have considered it necessary to increase their premiums in line with their claims experience or to exercise more selectivity in the type of risk undertaken.
The fundamental cause of high insurance prices for consumers in Ireland is the high claims rate allied to the high cost of individual claims. These factors bear on the level of insurance premia quoted to young drivers as well as those quoted to more mature motorists. We must get this straight. Fewer accidents on the road with a consequential lower risk of injury to the individual will bring down insurance premiums and will be the biggest contributing factor to determining the level of premiums not just now but into the future. I am not going to delay the House by quoting statistics for age groups, accidents and the graph in relation to the annual increase in the claims in these areas. They are astronomically high and getting very close to unbearable.
The Government are aware that when an insurance company quote in respect of motor risks for young people the premiums may be regarded by those concerned as excessive. The cost of motor insurance for young drivers, however, tends to reflect the claims experience of motor insurers. While I sympathise with the situation in which young drivers find themselves, statistical evidence has shown that they are more likely to be involved in accidents and, therefore, to cause claims. The cost of these claims can only be met by insurers if a realistic premium is forthcoming to cover the risk involved.
The Government are concerned at the high cost of motor insurance. An inter-ministerial group, comprising of the Ministers for, Justice, and the Environment, the Attorney General, and the Minister for Industry and Commerce are at present examining ways and means of improving the environment for motor insurance in particular. This group are focusing on strict and sustained enforcement of existing road traffic legislation, amendments to the Road Traffic Acts designed to reduce the motor accident rate, suggestions to improve the cost and availability of motor insurance and improvements or alternatives to the courts system for the resolution of personal injury claims. It is hoped that this may result in a number of positive proposals which can be implemented in the very early future. I would add, however, that Government action of itself will not reduce or stabilise motor insurance costs. Consumers must play their part by increased awareness of the need for safety.
Turning to where a motorist cannot obtain motor insurance, an arrangement exists with the insurance industry to assist in such cases, through a body called the Declined Cases Committee. This committee, established under the Declined Cases Agreement, is comprised of representatives of the authorised motor insurance companies. They examine cases which have been declined by five or more motor insurance companies and nominate one of the companies to quote for the risk involved. Before a case can be submitted to this committee for consideration, it is necessary to approach and obtain written refusals from five motor insurance companies. These should then be forwarded to the Declined Cases Committee, Irish Insurance Federation, Russell House, Russell Court, St. Stephen's Green, Dublin 2, indicating the order in which the insurers were approached together with details of any previous insurance held in the last three years. It should then be possible to have the necessary cover arranged.
Finally, the Deputy may be aware that a formal common position was adopted by the EC Council of Ministers under the Irish Presidency on 20 June 1990 on the EC Directive on freedom of services for motor insurance, which is due to be implemented by all member states before 20 November 1992. The underlying principle of that directive is the creation of greater competition in the areas of policy conditions and premium rates and that the general availability of insurance should improve overall. While it is hoped that the opening up of the Community market will intensify competition, it should be noted that there is already a massive foreign presence in the Irish motor insurance market. Over 80 per cent of non-life insurance undertakings operating in Ireland are foreign owned. Increased competition will not automatically lead to a reduction in insurance costs in Ireland. Prudent insurers, indigenous, foreign established or foreign services must set their premium rates to match the compensation payout. The compensation levels existing in each individual member state should determine the premium rates charged by both established and services insurers. The implementation of the motor insurance freedom of service directive should help to emphasise the role of the policyholder in determining the premium paid and minimise any misconceptions about "foreign" and "home" motor insurers in this regard.
I assure the Deputy that the Government are concerned to look at every avenue that could help young people or, indeed, anybody seeking insurance cover, but we cannot turn away from the reality of the statistics that face us in terms of the sustained underwriting losses and the increased payout in compensation on the individual claims which directly affect and determine the level of premiums today.