I thank Deputy O'Dea for raising this important question. I assure him that I understand everything he said and agree with much of it.
The recent increase in motor insurance costs to which the Deputy refers applies only to the Guardian PMPA Group which has increased its premiums by 5 per cent on average with effect from 1 November of this year. I am not aware that other insurers in the market have announced similar increases in their premium rates.
I have already, in answer to written and priority parliamentary questions in the House on 25 September and 22 October last, cited the reasons given by the insurer in question, namely, that deteriorating road accident statistics during the course of 1996 have 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 insurance industry has consistently said that the major factor driving up the cost of claims is a rise in accidents as a result of careless or drunken driving and, more recently, excessive speed. If that is true, and I am having the industry's view currently examined, until there is an abatement in such road traffic offences leading to accidents and mishaps on our roads, insurance costs will continue to remain at a high level for some.
The factors which give rise to increases in motor insurance claims, leading to insurance price increases, such as drunken driving, uninsured driving, speeding or careless driving, road traffic offences or prosecutions and other accidents and claims as a result of negligent behaviour on the roads fall within the province of several Ministers, notably the Ministers for Justice and the Environment. It is to be hoped that the imminent introduction by the Minister for the Environment of on-the-spot fines for speeding offences from 1 December next will give rise to safer driving practices and lead to fewer accidents and subsequent motor insurance claims.
I refer the Deputy to the recently published Deloitte & Touche report, to which he also referred, where the consultants have 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 differing 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 well be aware of quite recent reductions of the order of between 5 and 10 per cent announced by insurers during the course of 1995 and early 1996.
I have spoken on numerous occasions in the House in regard to the position of young and inexperienced drivers as a high risk category. The established facts in this regard, which I have previously detailed in response to previous questions are as follows: the most recent statistics available from the National Roads Authority show that almost 38 per cent of the motorists involved in fatal and personal injury accidents were young drivers, and 41 per cent of the road casualty victims in 1995 were between the ages of 18 and 34. The analysis provided by the sixth report of the Motor Insurance Advisory Board showed that claims frequency declines with age of policyholder for all types of cover. The analysis also showed that, in terms of relative claims cost, the 17 to 24 year old policyholder is a greater risk than those aged 25 to 30 who, in turn, are a greater risk than those aged over 30.
The Deloitte & Touche report on an evaluation of insurance costs in Ireland provides further evidence of the high cost of claims associated with the young driver. The consultants found that the average cost of an insurance claim for a 17 to 24 year old driver is over twice that for a 36 to 40 year old driver, and that motorists in the younger age group are responsible for over three and a half times the claim costs of motorists in the 36 to 40 age group. Given the facts, it is not surprising that young drivers may experience difficulty in obtaining quotations for motor insurance and that from an underwriting and solvency perspective, insurers will quote relatively high premiums to young and inexperienced drivers.
The Deloitte & Touche report concluded that the inculcation of safer driving standards in young drivers is the key to reducing their high accident rate and to obtaining lower premium quotations. In this regard, I would draw the Deputy's attention to the specific recommendations by Deloitte & Touche in relation to the introduction of a graduated licensing system for learner drivers and for a driving related course of education for secondary school students.
Action in relation to these recommendations is the responsibility of the Ministers for the Environment and Education. I also understand that an insurance incentive scheme is currently being established by agreement between the Irish Insurance Federation and the Driving Instructors' Register whereby insurance discounts will be offered to young drivers who have completed an agreed number of driving lessons over a calendar year.
It is a recognised principle on an EU-wide basis that in order 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 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 following the implementation of the third non-life insurance framework directive of 1994.
Underwriting losses have been a feature of motor insurance business for many years. However, these losses may be offset by investment returns on the reserves required to be held to meet outstanding claims. The insurance annual report for 1995 will provide, for the first time, on a company by company basis, details of attributable investment related to specific classes of insurance. This will enable my Department to examine the performance of individual insurers in terms of their overall profitability in the context of insurance premium levels. The Deloitte & Touche report in alluding to this matter has suggested that the supervisory authority might review the relevancy or the efficacy of taking into account investment income in the contest of insurers' own underwriting targets and the consequent effect of insurance costs. This aspect of the insurance industry's operation will be examined in the overall context of the implementation of the Deloitte & Touche recommendations.
The Deputy may be aware that the Government, in its consideration of the Deloitte & Touche report, accepted the recommendations in favour of the creation of a personal injuries tribunal and agreed to the establishment of a special working group to advise the Government on its establishment. The objective is to create the most efficient, prompt, lowest cost and fair system for coping with the consequences of personal injuries from the point of view of the individual, society and the economy.
The Dáil adjourned at 9.10 p.m. until 10.30 a.m. on Wednesday, 6 November 1996.
