Vol. 470 No. 4
11 Mr. E. O'Keeffe asked the Minister for Enterprise and Employment if he will appoint an official from the insurance division of his Department to investigate whether the current increase in the cost of motor insurance premiums is justified. [19159/96]
I assume the Deputy is referring to the recent announcement by Guardian PMPA Group that it will increase motor insurance premiums by 5 per cent on average with effect from 1 November 1996.
It is significant that the Guardian PMPA Group cited deteriorating road accident statistics as a factor in its decision to increase premium rates. The National Roads Authority report for 1995 indicates that road fatalities increased by 8 per cent over the 1994 figure. As I have already recently indicated to the House, in a written reply on 25 September last, the further reported escalation of road accidents during 1996 has caused the motor insurance industry to anticipate a rise in the number and cost of claims and to make provision to meet this rising cost by increasing premiums. The consistent view of the industry — and I am having this examined at the moment — is that the major factor driving up the cost of insurance claims, leading to premium increases for the motorist, is a rise in injuries resulting from drunken, careless driving or speeding.
I refer the Deputy to the recently published Deloitte and Touche report on insurance where the consultants concluded, in relation to private motor insurance, that the key factors affecting the premium rates offered to Irish motorists are the individual driver's maturity and safety record, and that motor insurers in Ireland quote widely different premiums for similar risks. The report also indicated that drivers with good claims experience have seen their insurance premiums reduced in real terms since 1990. In this regard the Deputy may be aware of recent reductions to the order of between 5 per cent and 10 per cent announced by insurers during 1995 and early 1996.
My Department has no function in relation to prior approval or prior systematic notification of increases in motor insurance premium rates. There is no longer a statutory requirement on insurers to seek prior approval of such rates since the abolition of price control in 1986, nor are insurers required to justify increases to my Department. Prior approval is now also prohibited under domestic insurance legislation (S.I. No. 359/1994) following the implementation of the Third Non-Life Insurance Framework Directive in 1994.
It is a recognised principle on an EU-wide basis that, to meet stringent solvency and reserves requirements, insurance companies must be allowed freedom to set their insurance rates in the light of their underwriting experience without seeking prior approval from the supervisory authority. In this regard the motor insurance market in Ireland has suffered underwriting losses for many years, according to the industry. For example, the underwriting losses for 1994 amounted to £47 million and while figures for 1995 are not yet finalised, it is anticipated that underwriting losses for 1995 will be of the same order.
I should point out to the Deputy, however, that following implementation of the Insurance Undertakings Accounts Regulations earlier this year, the insurance annual report for 1995, will provide on a company by company basis details of attributable investment related to specific classes of insurance. This will enable my Department to examine for the first time the performance of individual insurers in terms of their overall profitability in the context of insurance premium levels. The Deloitte and Touche report, in alluding to this matter, suggested that the supervisory authority might review the relevancy or the efficacy of taking into account investment income and its bearing on insurers underwriting targets and their consequent effects on insurance costs.
In view of the large number of new cars on the road this year and last the incidence of accidents is high. For that reason, should insurance not become more profitable? Some time ago I raised with the Minister of State the fact that certain companies are cherry picking business, yet the underwriting policies of many companies are not properly directed. They are making substantial money in that area. The Minister of State has a role to play in the domestic market where the 5 per cent increase has met with widespread resentment from the motoring public. While it is easy to say that this is because of the high level of accidents, there are no statistics to back up that argument. The Minister of State mentioned the maturity of drivers. Can he provide evidence of the number of young drivers who have got into difficulties and as a result created substantial costs for the insurance industry?
On the last point, I draw Deputy O'Keeffe's attention to the fact that a separate question has been tabled for my attention from his colleague Deputy Callely. My answer to that sets out statistics on the particular point he raises. Perhaps the Deputy can bear with me until we reach that question. In any event, the figures will be distributed and I am afraid that in the case of young drivers they do reflect the pattern of claims. That is a regrettable factor in terms of the Irish situation.
The two main questions posed by Deputy O'Keeffe concerned safety and the fact that the economy is now performing so well that there are many new cars on the road. I agree with the Deputy that one would have thought that should contribute to the level of road safety. Nevertheless, figures quoted by the industry suggest the number of accidents has increased. The Department has figures that support those claims only to some extent. While figures we have received from the Garda authorities are not in alignment with the figures quoted by the industry, there has been, nonetheless, an increase in accidents on Irish roads. That is a factor.
Deputy O'Keeffe's third point concerned cherry picking. I referred to the new regulation which requires more transparent presentation of figures than the global figure we received heretofore in the blue book. Those figures, which will enable us to examine the issues by class of insurance and company by company, will prove to be illuminating. As regards the review now under way in my Department arising from the findings of Deloitte and Touche, there may be some salutary lessons for us.
The recent Deloitte and Touche report referred to the Canadian system of assessment for young drivers. Does the Minister intend to implement that section of the report to assess young drivers as they are unfairly assessed? Three companies, the Guardian Royal, Guardian Insurance and PMPA, all part of the one organisation are competing for business. If the business was so profitable, I fail to understand why those companies would continue to advertise so aggressively and compete for business. That merits investigation.
I am close to Deputy O'Keeffe's assessment on this matter. I am somewhat puzzled by it as it is difficult to understand commercially. As a result of the regulation to which I referred and to the requirement it imposes to furnish data in a fashion that has never been the case heretofore, we are in a better position to investigate the phenomenon to which the Deputy pointed.
The "no foal no fee" system that operates in the industry has aggravated the high cost of motor insurance and the increase in claims. Can a regulation be put in place to prevent that type of operation by the legal profession? There is a vague reference to that in the Deloitte and Touche report. Does the Minister envisage that legislation could be introduced to outlaw the use of that type of system by the legal profession as it is affecting the insurance market, especially motor insurance where there has been an increase in claims?
The Deputy will be aware that I published the Deloitte and Touche report a number of weeks ago. I apologise if a copy of it has not been furnished to him and I will correct that. The report deals with the point he raised, about the "no foal no fee" phenomenon. It did not find evidence internationally or domestically to justify that it contributes to the higher costs associated with insurance in Ireland. It does not recommend that legislative action is warranted in that respect.
