Vol. 450 No. 7
5 Mr. M. Kitt asked the Minister for Enterprise and Employment the action, if any, he proposes to take in relation to each of the factors which were identified in a recent article (details supplied) as giving rise to the high level of insurance costs in the domestic economy; the timescale within which action will be taken; and if he will make a statement on the matter. [5555/95]
9 Mr. Callely asked the Minister for Enterprise and Employment the submissions, if any, his Department has received in relation to the high cost of motor insurance for young drivers; and if he will make a statement on the matter. [5601/95]
33 Mr. M. Kitt asked the Minister for Enterprise and Employment his main priorities for the insurance industry during 1995 in view of his interview with Insurance Update. [5554/95]
I propose to take Questions Nos. 5, 9 and 33 together.
My Department has received and continues to receive submissions from individuals and interest groups about high cost of insurance, including motor insurance cover for young drivers.
I would refer Deputies to the reply I gave to the Adjournment motion on insurance costs on 2 February 1995 in this House. In my reply I indicated that my Department has been examining the key factors contributing to high insurance costs, including the factors to which I referred in the interview alluded to by the Deputy in the Irish Insurance Federation's publication Insurance Update.
Following this examination I have decided to commission a detailed consultancy study to provide a substantive analysis of insurance costs in Ireland and their economic impact and evaluate the key factors contributing to higher costs here as compared to competing economies. I expect this study to provide an informed analytical basis for consideration of efficient and effective measures to reduce insurance costs to more competitive levels.
I can confirm for the Deputy's information that my priorities for the insurance industry during 1995 are as stated in Insurance Update, namely maintaining the highest standards of prudential supervision to ensure that companies are, and remain, in a position to meet their liabilities to policyholders; the reduction of non-life insurance costs; greater transparency in the marketing of insurance products; a regulatory regime on the marketing of insurance which will encourage consumer confidence in the insurance industry and which will encourage the development of a more competitive insurance market, and the identification and implementation of measures which will assist the industry to maintain and increase its support for employment, both directly and indirectly.
I thank the Minister for his reply. Has he specific proposals on the cost of motor insurance for young drivers because quotations are unacceptably high? Is he aware that in the United Kingdom motor insurers are considering a young drivers scheme and has he proposals for such a scheme here?
This is a hoary old chestnut and what the Deputy says is correct. Costs for young drivers are punitive but they are directly related to the incidence of accidents and the level of awards. The sophisticated statistical data base available to insurance companies can identify with great precision the areas of highest risk and consequently their products are beginning to mirror that, for example there are now special packages available to women drivers who — Deputy O'Rourke will be delighted to hear — are safer drivers.
Women are quite good drivers in spite of what everybody thinks.
Young drivers come out very badly in the statistical analysis and hence it is reflected in the cost of premiums.
I asked about the UK scheme but perhaps the Minister will reply to that later. What is the Department's view on direct selling as against the traditional method of brokers and underwriters?
There is nothing wrong with the way the product is marketed and sold. The problem afflicting young drivers is that they simply cannot get premiums at reasonable cost because of the general problems to which I have just referred. Young drivers have more accidents, and the frequency and level of awards is higher than in the United Kingdom, the jurisdiction to which the Deputy referred.
The general measures to which I referred in my reply which are designed to get insurance costs down generally will, I hope, have a spin off and have some impact for young drivers. They are the category that bears the greatest penalty and highest burden having regard to the current level of premiums.
Does the Minister believe the word processed reply which he read out? I recognise the wording because it was there when I was at his desk some months ago. Did I read correctly that the Minister announced to The Irish Times that he would appoint consultants to look at the cost of insurance to make sure there is an informed analytical basis? If what is in The Irish Times and what the Minister has subsequently announced to the House is what he will do, does it mean the Minister is leaving aside the four or five consultancy reports he already has, including one from Coopers & Lybrand, a very heavy one from the Department on the capping of insurance awards and the plethora of consultants' studies——
Did Deputy Brennan leave them on the shelf?
——which I know are already on the Minister's desk? Given that the Minister said the high cost of claims is the problem, has he any view on whether he will support legislation to cap such awards or will he wait until the consultants tell him what his Department has already told him. The very fine officials in the Department have produced a good report which indicates the way forward. The Minister does not need another report if he acts on the official advice which I know to be on his desk.
I have great admiration for Deputy Brennan's preparedness to come into the House to offer views on what should be done on the cost of insurance premiums. It is little wonder he recognises the answer as coming off the word processor because that was the way it was programmed when he was Minister. We continue to get the same answer in this House month after month but no action.
Legislation is nearly ready.
The action by the then Minister Deputy Brennan unfortunately had no effect. He told the consumer that the abolition of juries and two counsel would bring down insurance premiums but it had no appreciable impact at all——
Put them back then.
——which was a problem which Deputy Brennan generally had in the Department. As regards availability of reports, the problem is that some reports and some evidence points to insurance costs being higher in this jurisdiction than in the neighbouring jurisdiction, but the essence of the legislation being contemplated by Deputy Brennan related to the capping of awards for pain and suffering. With the exception of a good deal of anecdotal evidence, there is no reliable economic authoritative study that shows that within the matrix of costs, the capping of awards for pain and suffering. With indisputably lead to the reduction of premiums. That is the purpose of the study I have undertaken because I do not wish to follow Deputy Brennan by making promises to the consumer, such as to abolish juries, which at the end of the road make no impact. We have to be as certain as we can be that the measures we propose will lead to a reduction in insurance premiums.
Does the Minister accept that the abolition of the two counsel system ended up being more expensive because the one senior doubled his costs and as the junior got two-thirds of the costs we end up paying more legal fees? Second, who will be involved in the review? Third, have they been given a specific time frame in which to report?
I am afraid it is apparently the case that whatever about increasing the costs, the abolition of the two counsel system had no measurable impact. Legal fees are as expensive now as they were before this question was addressed. That is pretty difficult for the rest of us to understand because we live in a world of productivity deals and greater output and it is a bit puzzling that with one senior counsel the cost remains the same. Presumably that must be something peculiar to the way the Law Library operates and is not quite in line with the efficiency drive of some Members in this House. On who will comprise the group, a professional consultancy study will be put out to tender and I hope it will be completed speedily but in any event not later than in six months time.
Our colleague Deputy Ruairí Quinn made a statement on RTE on the insurance capping Bill a few months before the break up of the last Government. He said he was preparing it and it would soon be ready. Where is that legislative proposal? Neither Deputy Brennan nor I dreamt it up. I have a different point of view from that of my colleague but, as the Minister knows, Fianna Fáil embraces different points of views on different matters from time to time.
You could put that to music.
Detente entendu. Pain and suffering is not the main element. Where is the legislative proposal which Deputy Quinn announced one morning to a delighted, grateful and startled nation?
I acknowledge that there are different views in Fianna Fáil and we had startling evidence of that as recently as last week. I do not dispute that. As regards the announcement by the then Minister, Deputy Brennan, I would have thought Deputy O'Rourke, working closely with him in the Department, would be in a better position to elicit that information.
He did not leave it behind him. He took it with him.
As Deputy Brennan said, the highly competent officials have everything which was left behind by everybody in my Department. Some of its makes interesting reading.
That sounds threatening.
Will the study the Minister has in mind encompass public and employers' liability in addition to motor insurance? There is sufficient statistical evidence in the Department to indicate the problem areas in insurance. A number of small businesses in my constituency found that their premiums rose by well over 50 per cent because of their public liability claims. In some instances, small businesses are unable to keep going and pay public liability premiums. Difficulties in the motor insurance, public and employers' liability areas are underestimated. The Minister has considerable information available in his Department and I hope this study will be completed in a shorter time than the six months which he mentioned.
I agree that the situation is extremely serious. It is a significant and disproportionate cost to business — 3 per cent of GDP goes towards the cost of insurance. Employers' liabiltiy is a significant concern for industry. IBEC was assertive in its submission about how urgent a matter it is for its members. It is fair to point out that perhaps less attention is given to safety in the workplace.
Do not steal the Minister of State's thunder.
There is much information on this in the Department and surveys show that the incidence of preventable accidents in the workplace is far higher here. I am amenable to the argument by IBEC on the question of capping but I would like them to attach the same priority to improving safety in the workplace. I agree with Deputy Kirk that we live in an excessively litigious culture and that is part of the problem. As I said earlier, you may be prepared to accept that when one person stumbles into a manhole there is cause for compensation but when a number of members of the same family stumble into the same manhole you reach the inescapable conclusion that there are questions to be answered.
Is the Minister saying there is no comprehensive study available from his officials which satisfies him as to the need to continue with the legislation? I put it to him that there is such a study. Will he ask the consultants to examine the cap as a separate measure? There is a fine study embracing the last five years of awards and High Court actions which was painfully studied by his officials going back over six months. I know senior officials who spent months on end studying the matter. I am disappointed that is not enough for the Minister to act on.
As the Deputy said some work has been done but what satisfies me is a matter for my judgment. I have not received the assurances I require from the industry that premiums and costs will be reduced if we legislate in a certain direction. We must elicit such assurances from the industry and they must play their part. The specific matter of caps for pain and suffering is expressly included in the terms of reference which I circulated to a number of interested parties. I gave them seven days to reply and indicate if the terms of reference were defecitve or if they wished to add anything to them. Capping for pain and suffering is expressly provided for and the consultants will be required to compute the impact of capping in that component of a matrix of components. As Deputy Brennan knows, pain and suffering is not the only elememnt which drives up insurance costs.
The Minister referred to the link with health and safety at work. What moneys have been provided for the health and safety authority to provide the additional necessary inspectors and other staff? How many posts will be created? It is obvious that workers' lives will be at risk unless the matter is dealt with. There are not sufficient inspectors to carry out the required inspections.
Safety in the workplace is a factor, especially in employers' liability. The question posed by the Deputy is more appropriate to my collegue, Deputy Fitzgerald, who has responsibility for the health and safety authority. I am assured that this year, six additional staff have been recruited and I know the Minister of State has the matter under review. No matter how many people are employed by the Health and Safety Authority, it is the disposition of employers that is crucial. Indeed IBEC went out of its way to draw my attention to the fact that its advisory programme in this area is yielding results. There is a good deal of evidence to demonstrate that that is true but we have a very long way to go and it will require more than simply the provision of resources for the Health and Safety Authority to elicit the correct response.
Is there any liaison between the Minister's Department and the insurance industry in regard to fraudulent claims? Can any steps be taken to deal with that problem?
I have raised this matter with the industry and individual insurance companies. The problem is that an individual insurer frequently finds it cheaper to concede an award on the steps of the courthouse than run the risk of the case going to trial inasmuch if the insurer ends up liable for the legal costs of both sides in all probability they will exceed the amount of the offered settlement. Therefore, in small claims — which constitute a major area of abuse, I regret to say — there is a tendency on behalf of insurance companies to settle because it is cheaper. Deputy Kirk raised an interesting point. I am aware that some employers take the view that they will decide, not the insurer, and will prosecute those cases no matter what the outcome. That has shown an incidence of diminution because, in regard to public liability, the same issue arises. It is something that may be teased out further and on which I shall be interested to hear the views of the Incorporated Law Society and the Law Library representatives.
