I question the Deputy's assertion that the cost of motor insurance is spiralling.
I refer him to the reply which I gave to the House on 22 October 1996 in relation to an increase in insurance premiums by Guardian PMPA which has 30 per cent of the market. That increase was of the order of 5 per cent on average with effect from 1 November 1996 and I cited the reasons given for the increase by the company at that time. However, for the benefit of the House, I will reiterate that the insurer in question had stated that deteriorating road accident statistics during the course of 1996 will lead to an increase in the number of claims and a consequential increase in the overall cost of claims. To make adequate provision to meet this rising cost, the company decided it was necessary to generate additional premium income in the form of an increase in its premium charges. There were premium rate reductions announced by this company of between 5 per cent and 10 per cent during the course of 1995 and early 1996.
The other major insurer, the Hibernian Group, with 12 per cent market share has recently announced a 4.8 increase in premiums which, according to the company, will affect up to 60 per cent of its customers. That company has also stated that, as part of a rebalancing of its risk portfolio, it will reduce rates for some categories of mature motorists. Furthermore, it has indicated that young people as named drivers on family insurance policies will get more favourable rates under this new pricing structure. Customers who have other insurance policies with Hibernian will be offered discounts of up to 10 per cent on their motor insurance. The Hibernian Group has cited a 12 per cent rise in the number of claims arising from motor accidents as necessitating an increase in premiums and has made reference to the fact that in its experience the younger male driver continues to pose a bigger risk than those of more mature age.
With regard to accident rates, figures produced by the Garda Síochána for the 12 month period October 1995 to October 1996 indicate that, on a provisional basis, there was a 6.6 per cent increase in injuries incurred and an increase of the same order in road accident fatalities. Unfortunately, over the Christmas holiday period, the figures showed a 50 per cent increase in injuries over the corresponding period in 1995. These disappointing statistics must inevitably result in higher motor insurance costs in 1997, especially for those drivers at fault and for the categories of driver which the accident statistics indicate are a higher risk.
The Deputy has raised the question of the relationship between insurers' investment income and their underwriting targets. The issue of insurers' investment income strategy in relation to underwriting targets is a fundamental and complex question involving solvency and profitability considerations. The Deloitte and Touche report 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.
The insurance annual report for 1995, the Blue Book, provides for the first time a company by company indication of attributable investment income related to specific classes of insurance. The new Blue Book information showed motor insurance business for some major underwriters to be quite profitable, with premium and investment income considerably exceeding underwriting costs. The implication was that this class of business might be considerably healthier as a class of business than Governments and supervisors had previously been led to believe. Accordingly, I requested that an examination be undertaken of the annual returns of insurance companies for the previous ten years on the basis of the new reporting formula.
While complete figures for previous years are not available from all insurers, preliminary analysis of the figures received shows that annual investment returns have been very volatile. Investment income fluctuates for a variety of reasons, such as movements in the level of claims reserves, interest rate movements and investment strategy.
The compulsory disclosure of investment income by class of business from 1995 onwards, together with the results of the Department's own examination of the last ten years, will provide greater transparency for the purpose of assessing the overall profitability of the various types of insurance and of the individual companies, especially in the context of insurance premium levels. It is my intention that this increased transparency should provide a valuable basis for the Department to evaluate the contribution of investment income, its bearing on insurers' underwriting targets and the consequent effects on insurance costs, as recommended by the Deloitte and Touche report.