Dáil Éireann díospóireacht -
Wednesday, 13 Jun 2001

Vol. 538 No. 1

Adjournment Debate. - Motor Insurance for Young Drivers.

Mr. Neville

I wish to share my time with Deputy Naughten. I appreciate the Chair giving me the opportunity to raise this issue and welcome the Minister of State to the House.

For young drivers, particularly provisional drivers, the cost of maintaining a car has become prohibitive. The primary reason for this is the excessive insurance premiums with which young drivers are burdened. Provisional drivers are also faced with restrictions in having to be accompanied while driving and being prohibited from using motorways.

This morning Macra na Feirme launched a set of proposals to deal with this problem. I was privileged to attend the launch and congratulate Macra na Feirme on its initiative. The proposals are aimed at ensuring provisional drivers receive more training before using the roads and that they take more responsibility while doing so. In return, Macra proposes the removal of the requirement of accompanying drivers and the ban on provisional drivers using motorways.

It is clear that the current insurance situation for young drivers is unsustainable. Premiums are unaffordable for most young drivers and rates continue to increase. In a survey carried out in preparation of the Macra na Feirme proposal almost all the main insurance companies refused to quote young male drivers. The lowest quote available for a 21 year old male driver on a provisional licence was in excess of £3,200. This was £200 higher than one month earlier. The situation for female drivers was better, but the rates were still very high.

Provisional drivers have been castigated in recent times. Their existence has been put forward as a major contributor to the current high accident and subsequent claim rate. While it is not a good policy to have a large number of unqualified drivers on our roads, it has to be remembered that the reason for the large increase in the number of provisional drivers is the excessive waiting list for driving tests. At one point waiting lists of one year were common. There are still long delays in some counties and the average waiting time is 14 weeks. Provisional drivers have been seriously disadvantaged because of this. They have put up with punitive insurance premiums and other restrictions such as not being allowed to drive on motorways and having to be accompanied by qualified drivers. Provisional drivers, and young drivers in general, are paying exorbitant rates for car insurance. Under the law, if a person wants to drive, he or she must be insured. It is not acceptable that the Government can then stand back and allow the free market to be the sole determinant of what the customer pays for the product. This is particularly unacceptable when there is such high price discrimination. The situation for provisional and all drivers is now intolerable. In a survey carried out by Macra na Feirme none of the five major companies would quote a price to any inexperienced driver under 25 years.

The new penalty points system should be more severe on provisional drivers. There should be a much lower threshold for provisional drivers, particularly in relation to speeding offences. Any provisional driver caught speeding twice should be banned. For many drivers speeding is simply a bad habit. It is important that drivers are conscious of speeding from the day they start driving. A proper focus on speed detection rather than looking for L plates on motorways and monitoring the farcical rules of being accompanied would be a more effective way of ensuring provisional drivers are not a risk on our roads.

The current insurance rates are excessive and the Government should impose controls on the amounts insurance companies can quote for third party cover.

I pay tribute to the work done by Deputy Naughten in this area. He has produced an excellent set of proposals and I ask the Minister to examine them carefully. He proposes the introduction of a novice driver's log book and the establishment of a statutory register of driving instructors and has considered compulsory lessons. Above all, he calls for a reduction in the waiting times for tests and the appointment of additional driving testers who would be recruited on a permanent and contractual basis.

Mr. Naughten

I welcome the opportunity to speak on this matter and thank Deputy Neville for sharing his time with me.

The proposals put forward today by Macra na Feirme are very realistic. They complement the proposals we published last August. In the last five weeks since the introduction of the theory test insurance for young drivers has gone up £200. The theory test was supposed to improve the experience of provisional drivers and there should have been a recognition by the insurance industry of this fact. Instead, the insurance industry has increased the cost of insurance. The Government has again ignored the issue of insurance for young drivers and not tied the theory test into it.

Can the Minister of State give the House an update on the Motor Insurance Advisory Board? When will we see a result from it? Will the Government consider putting a cap on insurance premiums for young drivers? A realistic proposal has been put forward by Macra na Feirme. It should be given serious consideration.

Deputy Neville has highlighted a very important issue. I ask the Minister of State to wake up and do something about it.

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

Since the early 1990s successive Governments have grappled with the issue of insurance costs, in particular, insurance costs for young drivers. There has been extensive research into ways of reducing insurance premiums. This research has indicated that costs of settling claims, particularly personal injury claims, are largely responsible for high insurance costs.

When I became Minister of State with responsibility for commerce I provided that research that had begun into personal injuries compensation should continue. This research has resulted in the second report of the special working group on a personal injuries tribunal.

The Government, having considered the report, has adopted its major recommendation to establish a personal injuries assessment board and an interdepartmental implementation group is now considering the logistics of this. The purpose of the new board is to reduce the costs of delivering compensation to claimants, not to reduce the amount of compensation paid. Costs of delivery, that is, fees to solicitors and barristers, fees to expert witnesses and insurance administration costs can account for up to 40% of the total cost of settling a claim. The proportion can be much higher for awards of £10,000 or less. There is anecdotal evidence that for an award of just £10,000, a further £15,000 may be incurred as delivery costs. Accordingly, the Government expects that the PIAB will result in lower total claims costs, leading to lower premium costs.

While there is no denying the significance of the high cost of settling claims as a factor in the overall cost of insurance to the consumer, I took the view that there was a need to inquire into the bases on which premiums were charged to people of both sexes and different age groups. Accordingly, I established the Motor Insurance Advisory Board in 1998 to examine the factors that influence the cost of motor insurance, in particular the relationship between the premiums charged to different categories of drivers and the claims experience of those categories.

The Motor Insurance Advisory Board is chaired by Ms Dorothea Dowling, claims manager of CIE and a Fellow of the Chartered Insurance Institute. The board members are representative of the various groups interested in motor insurance.

The MIAB submitted an interim report to the Department last June. Deputies will recall that this document was released under the Freedom of Information Act last March. The board was very conscious that the data on which it had based its interim report were incomplete and that the findings were, therefore, tentative. Thus, the interim report clearly stated that the board required total acess to the individual raw data from each insurance company before any firm conclusions could be reached.

Most of that data has now been delivered to the board and the remainder will be forthcoming within a timetable acceptable to the board. It is vital that any consideration by the Government of issues arising from the levels of motor insurance premiums should be on an accurate and well-informed basis. The Government has a statutory duty to require insurance companies to comply with solvency legislation. Consumers have a right to expect that the insurance companies with which they deal will be in a position to pay claims and generally meet their obligations to their policyholders. The House does not need reminding that motor insurance companies have failed in the past. The only sensible course is the one taken by me, which is to allow the board to continue its work in order that it may carry out a full and detailed analysis on reliable and robust data. Thus, the Government may consider the recommendations of the board, confident that they are derived from a rigourous analysis of facts.

I understand Macra na Feirme has today launched a very thought provoking paper on insurance for young drivers. While the Department has just received these proposals, it might be worth commenting on some of them. One of the proposals involves compulsory driving lessons for provisional licence holders. This is a matter for my Government colleague, the Minister for Environment and Local Government, Deputy Dempsey. However, it is worth bearing in mind that compulsory lessons will add to the costs that young drivers have to bear.

Mr. Naughten

What about the cost of the theory test?

Mr. Treacy

If Fine Gael wishes to add to the costs of young drivers, this should be clearly enunciated. The final report of the motor insurance advisory board is awaited with great interest and the recommendations of that board will be examined in the context of the Government's desire to address increasing insurance premiums. Further, the Government expects that the personal injuries assessment board, when operational, will contribute significantly to reducing insurance costs. Apart from these two major initiatives, the Government is continuing to keep this matter under active review, conscious of the need to alleviate the difficulties experienced by motorists in general and young motorists in particular.