Dáil Éireann díospóireacht -
Wednesday, 17 Feb 1999

Vol. 500 No. 5

Written Answers. - Motor Insurance.

Jackie Healy-Rae

Ceist:

72 Mr. Healy-Rae asked the Tánaiste and Minister for Enterprise, Trade and Employment the proposals or legislation, if any, to be put forward or introduced to provide insurance for young people who need to travel to work and are unable get any type of insurance; and if she will set up a State company which would give insurance to young people. [4476/99]

Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy)

I have spoken in the House on many occasions on the subject of the relatively high motor insurance burden borne by young Irish motorists. I have made reference to the 1996 Deloitte & Touche report on insurance costs which confirms that motor insurance costs in EU countries are high for all young drivers, relative to rates charged to more mature motorists. Viewing this matter in a global context, insurers tend to classify young and/or inexperienced drivers as a high risk category relative to the more mature and/or experienced driver. Adverse statistics relating to claims frequency and claims for young drivers have been noted and enumerated in this House, and it is evident that the key to reducing insurance costs for young drivers is to improve their standards of driving and their appreciation of road safety.

A number of initiatives have been and are being taken to improve driving standards and safety awareness among young drivers including a scheme of insurance premium discounts by the insurance industry, in conjunction with the driving instructors register, on completion of a required number of driving lessons, road safety educational programmes for students, advertising campaigns by the National Safety Council to discourage speeding and the examination by the Department of Environment and Local Government of a graduated licensing system for learner drivers. In addition, I have re-established the Motor Insurance Advisory Board which is to advise me on the charges for and the methods for providing motor insurance between different risk categories of drivers having regard to accidents and claims.

Certain concessions to young drivers have been introduced by major insurers in the Irish market against the background of increasing underwriting losses in motor insurance. The 1997 Annual Insurance Report prepared by our Department, showed underwriting losses increased from £90 million in 1996 to £114 million in 1997. The deteriorating underwriting situation led some insurers to announce increases in certain insurance categories in 1998. In those circumstances, any discounts offered to young drivers, must effectively be subsidised by lower-risk categories of motorists. It does not make good commercial sense, nor is it equitable, that safer drivers should subsidise less responsible drivers. That simply reduces the incentive for safe driving among all classes of motorists, leading to increased claims costs and a progressive deterioration in the insurers' underwriting account. The end result is that average motor insurance premiums operate at a higher level than would otherwise obtain if the principle of risk-based premium-setting were strictly applied to all motor insurance categories.

I have no plans to establish a State company which would give insurance to young people. In order to operate on a normal commercial basis, the reality of high claims costs leading to high insurance premiums for young drivers would become apparent to any such company. There is clearly no soft option for reducing their motor insurance premiums. As a group, they represent a very high risk for insurers and many insurance companies are reluctant to quote. As with any other insurance risk, reductions in premiums can only be achieved by improved safety standards and, in the case of the young Irish motorist, the inculcation of safer driving standards and education in driving skills are the keys to reducing their high accident rate which, in turn, should lead to lower premium quotations.