Written Answers. - Non-Life Insurance.
Brendan Howlin
Ceist:
108
Mr. Howlin
asked the
Minister for Industry and Commerce
if he will outline the implications of the European Communities (Non-Life Insurance) (Amendment) Regulations, 1992, for motor insurance in Ireland; and if he will make a statement on the matter.
Ivan Yates
Ceist:
110
Mr. Yates
asked the
Minister for Industry and Commerce
if he will clarify the situation in relation to the introduction of full competition for non-life insurance into this country by other European insurers; when the previous derogation at EC level will no longer apply; the specific change which is taking place in November, 1992; whether it will be 1994 before the full changes are made; the circumstances under which foreign competitors will be allowed into Ireland in relation to the establishment of branch officers here; if he envisages that this will have the effect of reducing insurance premia for all motorists or for particular sections of the market; and if he will make a statement on the matter.
I propose to take Question Nos. 108 and 110 together.
Increased competition from Community insurers has been a reality in Ireland since May, 1976 with the implementation of the first Establishment Directive allowing freedom of establishment for Community insurers on either a branch or head office basis. At present over 70 per cent of non-life insurance undertakings operating on this basis in Ireland are foreign owned, the vast majority of which have head offices in the Community. In June, 1991 regulations were enacted (S.I. No. 142/1991) implementing the Second non-life services Directive which allowed cross-border community-wide freedom of services for most classes of non-life insurance with the exception of third party motor liability insurance. These regulations provide that insurers underwriting "mass" risks business (for private individuals or small commercial organizations) from abroad are required to fulfil relatively stringent requirements including the necessity to be authorized by the Minister. The more stringent requirements for the "mass" risks policyholders have as their aim consumer protection for the smaller, more vulnerable policyholder. On the other hand, insurers underwriting "large" risks as defined in the regulations are subject to less onerous requirements, on the basis that such clients are well able to look after themselves in the marketplace.
I recently signed the European Communities (Non-Life Insurance) (Amendment) Regulations, 1992, referred to in Deputy Howlin's question, which will give effect to the Motor Insurance Services Directive. These regulations will allow non-established EC insurers to offer motor insurance cover on a cross-border basis throughout the EC. The regulations will come into force on 20 November, 1992. As with the non-life insurance regulations mentioned above these regulations also provide for more stringent requirements for insurers underwriting "mass" risks insurance business.
I should point out that the special derogations which were available to Ireland for phasing in both the second non-life services Directive and the motor insurance services Directive have now been waived by me in accordance with the Government's commitment to a single insurance market, the hope of increased competition for the benefit of policyholders and an improvement in the general availability of non-life insurance overall.
The single non-life insurance market will be complete once the Third non-life insurance Framework Directive is implemented by all member states, by 1 July, 1994. This Directive is the logical progression from the partial liberalisation already achieved under the second non-life services directive and the motor insurance services Directive. The third non-life insurance Framework Directive will institute a uniform Community-wide system of authorisation whereby overall licensing and supervision of all the business of an insurance company will be the responsibility of the member state where the head office of the company is located. Ireland has sought no special transitional arrangements in relation to the implementation of this Directive.
Overall while it is expected that the full opening-up of the Community market may intensify competition on price, cover availability and quality of service, it should be noted that increased competition of itself will not automatically lead to a reduction in insurance costs in Ireland. At the end of the day prudent insurers must set their premium rates to match the compensation payout. In this regard, the level and frequency of awards existing in each individual member state will have a major bearing on the premium rates ultimately charged by both established and services insurers in the marketplace.
