Private Members' Business. - Insurance Costs: Motion.

I move:

That Dáil Éireann is acutely concerned at the escalating costs of insurance which have been exacerbated by the collapse of Independent Insurance and the effects of 11 September 2001 and the consequent threat posed to employment;

– aware that it has become virtually impossible for young drivers to get reasonably priced insurance cover;

– notes the growing difficulty in some sectors in securing employers' and public liability insurance;

– notes the spiralling increase in employers' and public liability insurance which averaged 42% last year and is forecast to average between 48%-55% for this year;

– notes that some small companies have gone out of business because of failure to secure insurance cover;

– deplores Government failure to take any significant action in this area over the last four and a half years or more recently to respond to the implications of 11 September 2001 or the collapse of Independent Insurance;

– believes that Government inaction will result in further job losses;

– notes the escalating cost of motor insurance generally and the hugely punitive cost of insurance for young drivers in particular;

– deplores the ongoing delay in introducing the long promised penalty points system for road offences more than three years after it was recommended in the National Strategy on Road Safety;

– deplores the failure of the Government to tackle exorbitant legal costs or to establish the Personal Injuries Tribunal;

– regrets the Government's failure last year to publish as promised the findings of the Motor Insurance Advisory Board;

– regrets the slow pace of modernisation of the courts, including the full development and implementation of "case management" and the adequate resourcing of the courts service to ensure efficiency and speed of trial and real, effective access to justice;

– calls on the Government to develop alternative dispute resolution mechanisms and real access to justice;

– demands that the general insurance market be subjected to a thorough investigation by the Competition Authority; and

– calls on the Tánaiste and Minister for Enterprise, Trade and Employment to enable the Equality Authority in the matter of motor insurance to conduct a statutory inquiry into allegations of discriminatory practices based on age or gender using its powers to require the production of documents and attendance of witnesses.

I wish to share my time with Deputies Moynihan-Cronin and Howlin.

The public learned on 18 June 2001 that the major British insurance group Independent Insurance Company Limited had been put into liquidation some days earlier. The company had stopped writing new business in agreement with, or at the direction of, the insurance regulator in the UK, the Financial Services Authority. TheFinancial Times at the time estimated that some 10,000 Irish policyholders were affected. Since that date last year virtually every Member of this House has been in receipt of correspondence and representations concerning the implications of the Independent Insurance col lapse. The impact on business, especially small business, and thus on employment was the most serious consequence.

That was before 11 September. The full impact of 11 September is still unknown. However, it has caused arguably the most serious shock ever to the insurance industry. The combined effect of the collapse of Independent Insurance and 11 September has produced an environment of uncertainty and escalating insurance costs. These two factors have again brought focus on our domestic insurance environment and on whether there is real competition in the market place, whether exorbitant legal and professional costs can be sustained and whether legislative reforms are necessary. At least, these issues have been the focus of discussion everywhere, it seems, except in Government. This is difficult to understand in the context of pleas from individual SMEs that escalating insurance costs may threaten their viability and lead to further job losses. Business lobby groups have been highlighting this issue as being at the top of their agenda for Government action since last summer, but there has been no Government action.

The one initiative that the Tánaiste or Minister is likely to promise again tonight in replying to this debate is the personal injuries assessment board. The purpose of this initiative is to reduce the legal and other costs associated with the delivery of personal injury compensation, but this is an initiative of the Rainbow Government. In May 1997, following acceptance of the McAuley report which was established for the purpose just described, a pilot project was ready for implementation. This Government has never explained why such a personal injuries tribunal, as it was then called, never went ahead, nor why it is now being revived and considered a good idea. It seems this Government abandoned the idea on coming into office. On 13 June 2001 the Minister of State at the Department of Enterprise, Trade and Employment, Deputy Treacy, told the House: "The decision of this Government to establish a personal injuries assessment board by next year seeks to address the issue of the high cost of settling claims by achieving a reduction in the delivery cost of personal injury compensation for work-related injuries."

Over the past few years, Deputies have been besieged by irate young people who cannot obtain reasonably priced motor insurance cover. Last year, for example, the National Youth Council of Ireland produced a report, The Plunder Years, highlighting the plight of young people who in many cases are expected to pay more for insurance cover than for the vehicle being covered. More recently, motorists generally are contesting unprecedented hikes in their insurance premiums. The insurance industry is promising more of the same. What has the Government done about these issues? Apparently, it has set up the Motor Insurance Advisory Board, or MIAB, to advise the Minister. Over the same period of around three years it has also promised to introduce a penalty points system for road offences. However, this has not yet been implemented.

The public would not know about the tentative conclusions of the MIAB if anIrish Times journalist had not extricated an interim report under the Freedom of Information Act 1997. The findings of that report seemed to contradict the traditional arguments of the insurance industry, not least as they related to young drivers. The Minister of State apparently received the interim report in July 2001. Although he was questioned on several occasions in the House on the issue of young drivers, the Minister made no reference to the interim report on his desk or its shocking findings. When its findings became public the Minister lined up with the industry and derided his own board's advisory report as incomplete. The board itself seemed to indicate that the industry was being obstructive and its chairperson thought that it might become necessary to recommend an alternative and more rigorous forum for investigation in this area of public concern. The Minister kept this a well-guarded secret, but after the Freedom of Information revelation he told the House to await the complete report which, he said, would be produced before the end of 2001. For example, on 3 May 2001 he told Deputy Flanagan that he was “confident we will produce a good report before the end of the year,” and by 20 November he had evolved a new formulation when he told me that he expected to receive the final report “by the end of this year.” It is now 5 February, almost four years after he set up the advisory board, and there is still no final report.

All of this betrays procrastination, inaction and neglect on the part of Government on one of the most pressing issues of the day – access to reasonably-priced insurance cover to permit normal business to continue and the provision of affordable insurance cover for young drivers. The Labour Party motion is designed to allow the House an opportunity to debate these major issues and to oblige the Government to acknowledge that its hands-off policy is threatening serious damage to our employment prospects.

I wish to refer to a letter which I sent, in desperation, on 29 March 2001 to the Mr. Niall Crowley, the chief executive officer of the Equality Authority, on the question of young drivers because nothing was forthcoming from the Government. As we say in our motion, the Labour Party believes that the Equality Authority has the power to conduct a statutory inquiry into allegations of discriminatory practices based on age or gender, using its power to require the production of documents and attendance of witnesses. The letter stated:

As I understand the situation, as well as the Equality Authority having a general remit to police this legislation and to work towards the elimination of prohibited conduct, it may for that purpose conduct a formal inquiry.

It has powers to insist on the supply of neces sary information, the production of documents and the attendance of witnesses to give evidence under oath. Failure or refusal to comply with the orders of the Authority is a criminal offence.

I make this point in the context of the Minister repeating his mantra today that he cannot get information. He said he cannot do anything because he cannot get information, but I am putting forward a way, using a statute law, to extract the information.

The letter continued:

I also understand that such an inquiry may relate not just to a specific and individual complaint but to sectoral or industry-wide practices. Indeed, it is hard to see how such practices could effectively be investigated and eliminated except by adopting such an approach. As well as making findings and recommendations your Authority is empowered to issue legally binding 'non-discrimination notices' requiring that specific practices should cease and that specific steps be taken to ensure that discrimination does not recur.

The letter is a great deal longer in its submission to the authority, but the chief executive, Mr. Niall Crowley, came back to me to say it was indeed within the remit of the authority and it would be delighted to undertake it, but only if the Minister made the budget available. I sought that on a number of occasions, but to date nothing has happened. The Minister's plea is that it is with the MIAB. Today he came into the House at Question Time and said he could not get the information, so he could not make any decisions. There was a way of getting the information that only required some funding. It would be eminently reasonable in the context of the scale of the problem but the Minister has not done it.

A major issue arises as to why an insurer writing cross-border business in a single insurance market can evade its responsibilities to policyholders in other states of the EU. In the case of Independent Insurance, it was selling insurance cover on the Irish market for many years, initially on a direct basis and latterly through an Irish branch. The real losers following the collapse were corporate policyholders and claimants on them, such as employees with outstanding injury claims etc. As a UK authorised insurer, consumers who were personal policyholders were eligible for compensation, perhaps up to 90%, from the British Policyholders Protection Board. The Minister has made clear that the UK authorities will not compensate Irish commercial policyholders. This means that a great many small companies lost their insurance cover and were obliged to go back into the marketplace to get insurance.

Every Member of this House has examples of how expensive that has turned out to be. I know a company that had paid £220,000 for employer's liability and having lost it was obliged to pay £510,000 to be re-insured. One significant employer in an Irish context wrote to my colleague Deputy Howlin to say that his company:

is facing exceptional loses of in the region of €900,000 in the payment of additional premium and to cover claims already in the pipeline. On top of this we are also facing increases of 100% for premiums into the future. . . We expect to suffer extra costs of in excess of €2 million over the next few years as a direct result of the collapse of Independent Insurance.

He goes on to say that it will undoubtedly lead to job losses.

A well known family-run hotel employing 250 staff wrote to me to say:

We hope you can understand the shock we suffered. . . We are now in a position where claimants are suing our business. Solicitors who previously acted on behalf of Independent Insurance are seeking funds from us. . . We estimate that our business is exposed to £500,000 in claims and we have no insurance cover in respect of them. The enforcement of these claims against us may force us to sell part of our property as we are already heavily indebted to the bank.

A small company with an estimated turnover of £140,000 sent me the reply from its broker:

I am now in receipt of quotations back from the market and it is with great regret that I have to report that the best quotations we have secured are as detailed in the attached summary.

The summary shows the 1999 premium was £2,300, the 2000 premium was £3,537 and the 2001 premium was £11,450.

A small manufacturer employing 35 people wrote to my colleague Deputy Shortall saying:

Over the past 12 months we have experienced a 100% rise in our insurance costs. . . Indeed for a time at the latter end of last year we had a grave concern that we would not be able to obtain insurance at any cost.

He goes on to say that his company has the ISO 9002 quality system for ten years and makes the following remark:

Over the recent past the consolidation by the insurance industry is resulting in a reduced number of insurers which I feel is extremely serious as this effectively reduces the level of competition in the industry and increases the risk of a cartel like situation.

I could continue with examples for more time than I am allotted. I am sure my colleagues on all sides of the House will be giving further examples from their own constituency experience. Insuring against the risk of injuries to employees or customers seems to have attracted the steepest increase in premia. Small builders, steel erection companies, hauliers, restaurants and high risk manufacturing are subject to ever greater price increases than the average.

After 11 September we have seen the Government, like other member governments of the EU, bonding the aviation industry for billions. If Governments had refused to intervene the airlines simply would not get insurance cover in the marketplace. Apparently this inability to get insurance cover against terrorism risk for property and certain kinds of business has now become general. Many commentators interpret this trend as the insurance industry seeking to transfer huge exposure from the private sector to member governments. The explanation is that when insurance premiums come up for renewal the industry cannot get re-insurers to underwrite the risk. Coverage in Ireland in this area is not compulsory and there must be a prospect of some commercial properties not being insured against terrorist attack.

Insurance premia for employers, public liability and for motorists have risen dramatically over the past year or so. The insurance industry pleads 11 September, the collapse of Independent Insurance and High Court decisions that require insurers to strengthen reserves against pending claims. This trajectory of dramatic increases in costs is forecast to continue. The Small Firms Association argues that insurance costs have increased on average by 41% in 2001 and thousands of small businesses now face the prospect of greater average increases that will probably be 50% in 2002. The cumulative impact will cost jobs and some small companies will ultimately find it difficult to trade. The rate of accidents in Ireland is high, the propensity for litigation ubiquitous, the legal costs exorbitant and the awards higher than in most other jurisdictions. However, the SFA argues that despite analysis demonstrating that the accident rate has fallen, costs associated with accidents have risen. It says that total premiums paid by Irish business is over £1 billion annually and that the total insurance market is £2.8 billion, of which £600 million goes to pay the legal and administrative costs associated with claims.

In April 1997, as Minister with responsibility for commerce, I took the report of the special working group on personal injury compensation that I had established under the chairmanship of Dan McAuley. It recommended the establishment of a personal injuries tribunal, which I authorised initially on a pilot basis, which was designed to substantially reduce the number of personal injury claims being brought to court, thus reducing the legal and other costs involved in the delivering of personal injury compensation. The costs of delivery of compensation, it is argued – although contested by the Bar Library – run at 40% of the total cost of claims. That was in May 1997 and discussion on the manner of its implementation was to proceed as expeditiously as possible.

It is difficult to discern whether the new Minister stopped its implementation or simply allowed the McAuley innovation to die. The record shows that it was only after an outcry from the Opposition parties that the McAuley group was revived in September 1998. We do not know why the McAuley group became redundant in June 1997. We do not know what went on between June 1997 and September 1998, but we do know that the personal injuries tribunal was never established on a pilot or any other basis. Curiously there is no date on the second report from the McAuley group, but its non-appearance featured strongly at the Joint Committee on Enterprise and Small Business on 9 January 2001. Eventually on 27 March the clerk of the Joint Committee was advised:

Following a Government decision last week we now have the green light to proceed with the main recommendation of the group which is the establishment of a Personal Injuries Board, PIAB. An interdepartmental implementation group will be set up shortly to decide on how best to establish such a board.

Almost four years after this Government came to office, Mr. McAuley's group produced a second report whose main recommendation was, unsurprisingly, the same as its main recommendation four years earlier in April 1997 in its first report, except, as isde rigueur in circumstances where Government is striving to conceal incompetence and neglect, a new name was attached to the main recommendation, namely, the personal injuries assessment board. On 27 March 2001, we were told that an interdepartmental group would decide how to implement the board. That was precisely the position in June 1997 and, in so far as I can see, that is still the position.

This must raise questions about the political will in the Government to implement such a challenge to the existing order or, indeed, to implement any reforms in an area so important to the lives of so many people. Time and again over those four and a half wasted years the House has listened at Question Time and during Adjournment Debates to the mantra of the Minister which, in the interests of accuracy, I quote: "The pricing and underwriting of insurance is a matter for individual companies and the EU prevents us from intervening in relation to the matter of premium levels or in respect of what risks they are prepared to underwrite." This mantra has been used as a shelter for the Minister to do nothing and, confronted now with a crisis, that mantra must be exposed as bogus. It did not stop the Minister for Public Enterprise from falling into line with other members states after 11 September to ensure that airlines could get off the ground. The pity is that she did not argue a wider remit. Nor should it stop any Minister from intervening at Commission level if necessary to ensure that small business is not grounded because of inability to secure reasonable insurance cover.

In the context of this shelter for inactivity it is interesting to note the description by the chairperson of the MIAB, Ms Dorothea Dowling, of the board's remit. She said: "The brief of the Board includes establishing whether the resultant costs are effectively and equitably distributed over various categories of drivers." I am bound to inquire what is the purpose of Ms Dowling and the MIAB in so establishing since the Minister's and his Department's mantra could not be reconciled with this purpose? Of course, the Government cannot continue to refuse to intervene in the circumstances now prevailing. The Government seems unwilling to confront some of the powerful vested interests in this situation. Therefore, there are no signs of these different interests playing their part in addressing a phenomenon now out of control. The result is that the consumer will pay, the taxpayer will pay and, worst of all, some workers will pay with their jobs. A number of the social partners, including IBEC and the farmers' organisations, and not just the SFA, have publicly expressed their alarm at the trend I have spelled out. Last week on the RTE radio programme, "Morning Ireland", Mr. Gerry O'Callaghan of the Joint Managers Body highlighted that the average cost of schools' insurance had risen by between 20% and 25% in the past year.

There certainly is no EU veto to an Irish Government addressing the domestic costs environment. The Government is about to leave office and its one initiative, still not implemented, was inherited from the previous Government. I agree with the SFA that it is not possible to acquiesce in circumstances where it is claimed that non-compensation costs amount to over 42% in personal injury cases. I have great difficulty personally with the proposition that legislation to cap awards ought to be introduced. It seems that in the new worsening environment, given the political will, there are many things that could be done to end the charade that drags on in cases for so much longer than is necessary at enormous expense ultimately to the consumer.

A huge proportion of the caseload where liability is not contested could be taken out of the courts and dealt with more speedily, more efficiently and less expensively in an alternative disputes mechanism such as was envisaged by the first McAuley report in April 1997 and in the second McAuley report in March 2001. I draw attention to section 46 of the Courts and Court Officers Act, 1995, which allows the Minister for Justice to impose scales of costs in relation to particular cases. This permits, in effect, a sort of price control and it allows the prescription of "appropriate scales of solicitors' costs and counsel fees."

Without interfering with the citizen's right to access the courts or with the desirability of the court to use its discretion in a particular case, much can be done to bring reality to a process that is simply no longer sustainable. The fact remains that the man and woman in the street cannot understand the inordinate delay in settlement of cases. What are the obstacles in the way of early settlement? Would such delays be toler ated in any other walk of life? To what extent is the operation of the courts responsible? To what extent does the insurance industry deliberately contrive such long delays to get the benefit of investment income? Why does it take a year on average merely to deliver a defence? Why is there a continuing lack of transparency in the figures published by the insurance industry?

The story on the motor insurance side is no better. The Government is aware of the hugely punitive situation that applies to young drivers in particular. Latterly, the problem of escalating premium costs has begun to apply to motorists generally. Yet the pace of any tentative steps by Government is so slow that there is despair, especially among young drivers. How can the typical young person be expected to source from €4,000 to €6,000 or higher for insurance cover? Some young drivers are paying over ten times the average car insurance. For example, a 17 year old driver from my constituency is paying £3,800 to insure a 1100cc Ford Fiesta for third party fire and theft. A 22 year old driver on a full driving licence was paying £2,230 to cover a 1300cc Mazda. He had a crash and was required to pay £4,300 to renew his policy. A father and his 23 year old son on a provisional licence on a joint policy to insure a Mitsubishi Lancer are paying £98 per week or £5,096 per annum. A 20 year old driver from Tallaght on a provisional licence was quoted £6,000 to insure a new Ford Focus.

I accept that young Irish male drivers have a disproportionately bad record in terms of safety. However, there are thousands of responsible young drivers who need a car to earn a living and who are denied reasonably priced insurance. This is very unfair to young people who are responsible drivers. I accept that the insurance companies cannot predetermine who will be the responsible drivers, as compared to who will be the reckless ones. However, serious hardship is being imposed on young drivers whose parents are not in a position to bail them out. The insurance industry has not explained why its traditional explanation for the loading on young drivers has been challenged by the interim report from the MIAB. For example, that interim report states:

The most significant indication to date is that young policyholders, who pay the highest rates, produce larger surpluses of premium over claims cost than most of those aged 25 and over. This is based on the average of five years data received for the years 1993 to 1997. The classification of all drivers under 25 as a non-profitable risk for insurers is now open to question. For example, the margin of premium over claims cost was £211 for ages 22 to 24, compared to £60 for ages 46 to 55, or a 258% higher margin. On average for the five years 1993 to 1997, every age of policyholder contributed more in premium than claims cost, except for the small number of policyholders aged 17 and 18. One of the highest profit margins was 30% for policyholders aged 66 to 70.

That report goes on to state that although the authors had been furnished with gender data only to 1997, "Women also appear to be contributing more than their fair share in certain instances." The board further notes that "the majority considers to be unduly simplistic suggestions that issues relating to the cost of insurance will be resolved by reduced accident frequency." If this conclusion is reinforced in the much awaited final report, it will stand the conventional explanations on their head.

The interim report concludes:

All board members are anxious to reach decisive conclusions. This is dependent upon receipt of the data required for further analysis of premium charges and claims costs over various categories of risk. If the IIF does not provide the raw data, the majority of the board believes that it may become necessary to recommend an alternate and more rigorous forum for investigation in this area of public concern.

In deference to my colleagues, I must defer the remainder of my contribution.

I welcome the opportunity to contribute to this very important debate and I regret it is not possible to deal with all the issues in the limited time available. Like my colleagues, I have been contacted by many small businesses which are facing great difficulties. I will quote one company which contacted me today, knowing the debate was to take place. It is a small company, employing 52 people, involved in the tourism and leisure industry and its employment doubles during the summer period. It faced an increase last year of 33% and its broker has advised it that there is a prospect of a 50% increase this year. In recent years businesses, particularly those in my constituency of Kerry South, try to invest any profits they make. The tourism industry in the area has prospered as a result because the facilities on offer have been continually upgraded. However, if insurance costs continue to rise, there will be no money available to reinvest. This will lead to a loss of jobs in my constituency.

One of the main issues to which I wish to refer is the high cost of motor insurance, which has been tolerated by the Government and used as a tool to keep young drivers off our roads. I appreciate that the highest percentage of road accidents and fatalities involve people in the 17 to 25 year age group. Sadly, people in my constituency and others throughout the country have experience in this regard. I argue, however, that there are numerous means by which young people who speed or drink and drive can be encouraged to desist from doing so. I accept that hitting them with high insurance premiums can prove to be a disincentive, but it is not acceptable or fair that other young people are being penalised for misdemeanours on the part of some of their peers. The latter is particularly true in the case of young people in rural areas who do not have access to public transport. As the Minister of State is aware, these young people rely on their cars to get to work, travel home to care for their elderly parents and engage in social activities.

Many young people from remote parts of south Kerry have informed me that they cannot take up job offers because they cannot afford to pay the insurance on their cars. In addition, they are not in a position to qualify for cover on their parents' insurance as many did in the past. That is no longer an option. Another factor that mitigates against young drivers is the lack of competition in the motor industry. I spoke to a 19 year old man last week who could only find one company which would offer to insure him on his car, but even then the huge cost was far beyond his means. If there was a greater degree of competition in the market, this young man, who needs to insure his car for the purpose of gaining employment, would have enjoyed more success in obtaining insurance.

I ask the Minister of State to take on board another issue. I refer to the crisis in the insurance sector – a matter I raised in the House last year – namely, in terms of insuring events and festivals. Puck Fair, fleadh cheoils and the St. Patrick's Day parades are being financially crippled as a result of the huge insurance costs being imposed. This has resulted in many events being scaled down or, in some cases, cancelled. These festivals are part of our tourism culture and should not have to be cancelled as a result of such huge costs.

There are other issues with which I would like to deal, but do not have the time to do so. However, I wish to refer to one final issue on which Deputy Rabbitte also touched, namely, insurance costs for schools, particularly national schools. I thought the days when parents were obliged to knock on doors to seek funding to pay for facilities in national schools were long gone. However, it appears that they will return if insurance costs rise any further.

This is an extremely broad canvas upon which to paint in five minutes and I will not attempt to deal with the many facets to the motion in respect of which our spokesperson, Deputy Rabbitte, argued so ably. The Deputy was the previous Minister of State with responsibility in this area, but, unfortunately, his tenure was too short. If he had remained in office, many of the issues being addressed in this debate would have been resolved.

For many, the issue of insurance costs is a yawn. I am intrigued by the huge crowds in attendance in the Visitors Gallery and the Press Gallery tonight to listen to this debate. Members, however, receive a great deal of correspondence about this matter from people expressing their concerns. Real problems are being posed across the economy due to the difficulty in obtaining affordable insurance for certain categories of people and businesses. That is an undeniable fact. Having listened to the contribution of the Minister of State at Question Time I am less than expectant that we will receive a comprehensive response.

This is a multifaceted motion and I would like to spend time which I am not in a position to do discussing the fact that many young people find it impossible to start driving. It is not as if we have a public transport system, particularly in rural areas, which gives people options. The Government operates under the pretence that it is serious about the development of infrastructure in rural areas and about holding together communities situated in areas outside the main conurbations. The issue of affordable driving of which insurance is a critical component has been neglected for the past five years by the current Administration.

I wish to refer to the critical difficulty in the maintenance of employment and of small to medium-sized businesses for the want of affordable insurance. I want to deal with the pressure being exerted on businesses of various sizes as a result of the collapse of the Independent Insurance Group and the consequent pressure placed on companies seeking affordable insurance. Illustration is the best form of debate and I wish to refer to three companies in my constituency in Wexford – the experience of which, I am sure, is mirrored in businesses throughout the country. My file is full of correspondence about matters of this nature from businesses in County Wexford alone.

I will refer to the first company as "Hotel A" because I do not want to identify it. This hotel was developed at a cost of £3.5 million over the past five years and has been left with no insurance and vulnerable after the collapse of the company by which it was insured. The business is vulnerable to claims of tens of thousands of pounds and those who run it regard their position as critical. There is no affordable replacement for the hotel's insurance and it is at a loss, not only for the cost of the premium, but also for the considerably greater cost of finding a replacement insurer.

Deputy Rabbitte has already referred to "Hotel B", which has a staff of 135 and which, so far, has been exposed to £75,000 in claims. The owners of the hotel fell vulnerable because their business has already been affected by the impact in the reduction in tourist numbers in recent months. According to the most recent statistics, the south east has been the most seriously affected area in this regard. In order to obtain replacement insurance for that which it has lost, the company involved has had to defer plans for much needed expansion and place further investment on hold. These are not flights of fancy, but concrete examples.

The last example to which I wish to refer is a large family business which employs 500 people. The company in question also lost its premium last year and found, after much difficulty, an expensive alternative. Those who run the com pany estimate that this will result in an additional cost of €2 million in the coming two years. This will have implications for any planned expansion and proposals to create new jobs.

I wish to highlight a further example, which is even sadder than those to which I have already referred. I refer to a group of workers who were laid off from one of the many companies in County Wexford which closed down in recent years. These workers wanted to establish their own business and had the necessary skills and business plan to do so. However, they could not do so on foot of a lack of affordable insurance.

These are real issues that are affecting employment, sustainable business interests and young people, to mention but three categories. I commend my colleague, Deputy Rabbitte, for tabling this motion. However, we expect something more than platitudes from the Minister if he has any recognition of the scale of the crisis that is real in our community.

Is cúis áthas dom deis a bheith agam freagra cruinn beacht do rún Pháirtí an Lucht Oibre a chur os comhair na Dála.

I move amendment No 1:

To delete all words after "Dáil Éireann" and substitute the following:

"fully recognises that the major determinant of the price of insurance in Ireland, is the high cost of settling claims;

Having regard to the existence of the tort system for deciding levels of compensation; the proportion of the cost of claims accounted for by legal costs; the cyclical nature of the insurance market; the implications of the collapse of Independent Insurance Company Ltd. (UK) on 17 June, 2001; the serious implications of the events of 11 September last, in the United States of America, for the global insurance industry, particularly the increased cost of re-insurance; and the fact that there have been no failures of insurance companies here in Ireland since 1984;

– commends the policy of the Government, to provide a wide choice of insurance cover, at the most competitive price available, by pursuing a policy of encouraging as much competition as possible on the Irish market, including from other EU insurers;

– commends the initiatives taken by both the Tánaiste and the Minister of State with responsibility for science, technology and commerce in establishing the Motor Insurance Advisory Board and the implementation group charged with progressing the establishment of the Personal Injuries Assessment Board;

– recognises the importance of the work undertaken by both the implementation group and the advisory board and awaits with interest their imminent reports;

– notes that the National Road Safety Strategy has resulted in a decline in the numbers of accidents and fatalities, against a background of greatly increasing numbers of motor vehicles;

– notes the enhanced activities of the Health and Safety Authority and the declining numbers of accidents in the workplace over a period, where the numbers employed, have greatly increased to their highest number in history;

– notes that this Government considers that further reductions in fatalities and accidents, are achievable;

– commends the Government's proposed reforms in the Road Traffic Bill that are designed to further reduce road traffic accidents, and the initiatives planned by the Health and Safety Authority and the Workplace Safety Group to effect further reductions in accidents in the workplace; and

– commends the Government on all of its efforts to date, to ensure adequate, sustainable and reasonable cover for all insurance consumers.

I am very aware of the difficulties being experienced by all consumers of insurance, both personal and commercial, in the past two years. I am also aware that prices have increased sharply in the past year, and especially since 11 September last.

There are a number of reasons, both international and domestic, for these increases. First, insurance, both global and domestic, is a cyclical business, and it has been generally agreed that after a number of years of technical losses the insurance industry, both in Ireland and elsewhere, was entering a phase of the cycle, where prices would increase, even before the unfortunate events of 11 September last.

It is estimated that the current losses as a result of the 11 September attacks in the USA are in excess of $115 billion. This has seriously impacted on the global insurance industry. Most of the insurance losses will be borne by the same re-insurers with which Irish insurance companies would hope to reinsure their future large losses. The two main companies affected as a result of the situation in the United States are two of the leading players in our insurance market.

It is apparent that the international reinsurance market's capacity to cover losses has been impaired. As a result, certain types of cover – for instance cover for losses resulting from terrorist actions – may not be available again or may be available only at a very high price. Normal reinsurance cover has increased greatly in price, reflecting the changed circumstances. Until the capital available to the international industry is again commensurate with the value of potential losses, reinsurance will remain relatively expensive.

The net effect for consumers is that the cost of insurance cover has increased dramatically and the availability of cover has contracted accordingly. The Irish Insurance Federation acknowledges that the events in New York impact more severely on the cost of liability insurance than on that of motor insurance. Nevertheless, motor insurance will be affected also in so far as it is necessary to reinsure large risks, which are all too common in Ireland with our high claims costs.

In addition to the effects of the insurance cycle and the events in the USA, there are domestic factors to be taken into account. Two High Court judgments on how to calculate future losses and on reimbursement of hospital costs by insurers have the potential to greatly increase awards in personal injury cases and highlight the need to strengthen reserves in outstanding cases. In addition, in relation to house insurance, there has been a succession of bad winters, giving rise to a significant number of property damage claims, in four successive years.

Normally, insurers could expect that losses that are incurred in one year would be balanced by fewer losses in the following year. Unfortunately, this has not happened in Ireland for some time. Insurers in the past could rely on investment gains to help to balance losses. However, in recent years investments have performed poorly, thus adding to the need to increase premiums in order to maintain solvency margins and statutory requirements. Insurers would have their funds assets invested in a range of assets, for example, property, land, secured debts, cash etc. They would do this partly because of regulatory requirements but also as a matter of prudence to spread the risk to avoid the full consequences of a fall-off in return from a particular sector of the investment area, for instance, the area of shares, which can be particularly risky.

Even within share investments they would be expected to have a balanced portfolio of share holdings e.g. IT, financial, general etc. Again, the reason would be to avoid too great an exposure to one area and to achieve a balance between risk and the potential for growth in share values.

The difficulty, however, is that stock markets in general have performed less well in recent years than heretofore. As we know, the IT sector has had a particularly noticeable downturn, due to a slowdown in the general world economy and consequently in demand for its products.

The decrease in investment returns is having a considerable effect on insurers' investment income. Unlike previously, when good invest ment returns could be used to offset losses in underwriting, this is no longer the case.

The Irish stock market has fallen considerably in recent days, but share values can vary considerably over time and so a long-term view is required. However, at present, investment returns internationally are currently low across the board.

Many consumers are exasperated because they are asked for higher premiums although they have not made a claim. While I can understand their annoyance, it is worth bearing in mind that insurance always seeks to pool risks. Thus, when the number of claims is significant, the burden of paying is borne by all policyholders although those who make claims may be asked to pay rather more than the generality of policyholders. With the alarming scale of the increases in the cost of insurance in the past year and those suggested as being likely in the coming year, many look to the Government to intervene.

The cost of insurance in Ireland is not a new problem. Governments have grappled with this problem for many years. With the creation of the European Union Single Market in insurance, we looked forward to more competition on the market from EU insurers. To encourage such competition, the cap on commissions was removed by me. However, the numbers of EU insurers seeking actively to write insurance on the Irish market still remains disappointing. As the Single Market matures, we may see greater interest in writing insurance in the Irish market.

As the legal completion of the Single Market for financial services, including insurance, was achieved, the sector was the subject of a round of mergers and take-overs. It is argued that such mergers will bring benefits to consumers arising from economies of scale. Many consumers are sceptical of this and believe the contraction in the number of companies offering insurance, is linked to increasing prices. As I have already pointed out, there are other factors, such as the point of the insurance cycle that we have reached. However, we continue to monitor this issue and will keep it under review, particularly in light of the report of the Motor Insurance Advisory Board.

The EU dimension brought with it certain disciplines. The Third Directives contain an explicit prohibition on price control or intervention by all governments. The logical consequence of the prohibition on price control is that it precludes Governments from intervening in matters of underwriting – for instance, in seeking to enforce a more universal approach to rating risks, or regulating how particular categories of risks may be underwritten. Thus, the Government cannot intervene in the current circumstances, to control prices or premiums. To do so would be contrary to EU Law.

Taking account of this, the policy of successive Governments has been based on three principles: first, to encourage as much competition in the market as possible, if necessary by removing or minimising those barriers to entry that are within the control of Government; second, to recognise that the price of insurance is driven by the high cost of claims settlement; and third, to address claims settlement costs by reducing the incidence and severity of accidents and by seeking to reduce the cost of the delivery of personal injury compensation, now running at as much as 40% of the cost of claims.

The Government's campaign to reduce road traffic accidents has been largely based on the national road safety strategy. The evidence is that this strategy is now working and is delivering reductions in the numbers of accidents, fatalities and serious injuries. These reductions are particularly impressive against the background of the greatly increased number of registered vehicles currently on the roads. According to the National Roads Authority, the number killed on Irish roads has declined from 478 people in 1990 to 415 people in 2000. Meanwhile, the registered vehicle population has grown from just over one million in 1990 to 1.68 million in 2000. This means that the fatality rate per million vehicles has fallen from 454 people in 1990 to 246 people in 2,000. The downward trend in the number of serious injury accidents continued, from 1,345 people in 1998 to 1,189 people in 2,000.

This confirms that the Government's strategy is working. However, the Government acknowledges that there are still far too many accidents, too many seriously injured people and, regretfully, too many fatalities. Apart from the cost of insurance claims, the human cost of these accidents is unacceptable. We are determined to achieve significant further reductions. The Road Traffic Bill will introduce reforms that will strengthen, streamline and improve the enforcement of existing road traffic law. The picture is the same in relation to workplace accidents. Statistics supplied by the Health and Safety Authority and confirmed by an IBEC survey, published in March 2001, show that accidents in the workplace fell by as much as 21% from 1999 to 2001, according to the IBEC survey, although the numbers at work have greatly increased.

The statistics support the Government strategy which has been to strengthen the HSA so that it may adopt the most effective strategies and to discourage the conditions which make workplace accidents possible. Further initiatives are planned to bring a partnership approach to making workplaces safer, including those associated with small and medium-sized businesses. In the circumstances, it is legitimate to question the reason that falling rates of motor and workplace accidents, taken together with greatly increased premium income due to the increased number of registered vehicles and the increased numbers of those at work, have not led to a fall in premium costs.

The response of the insurance industry is that while the number of claims may have declined, the cost of settling claims has constantly increased. While the number of people sustaining injury of varying degrees of severity increased, it appears that the number of serious injuries has been on a downward trend. This suggests that the frequency with which insurers have to pay compensation is decreasing. However, it does not mean that the total cost of paying claims is decreasing accordingly. The insurance industry argues that costs are increasing to reflect our improved economy. Thus, for example, compensation for lost wages is now higher than it was three years ago.

Before I turn to the current policy initiatives being pursued by the Government, I would like to address the issue of Independent Insurance Company. Independent Insurance Company Limited was a UK authorised insurer. It is at present in provisional liquidation and the liquidation process must be dealt with under UK law. The company is under investigation by the serious fraud office in the UK also. The UK company collapsed on 17 June, a bank holiday in Ireland. My Department was notified on 18 June of this situation. We received several calls on 19 June from several important companies in this country which had lost immediate cover. On 20 June, I called in the IIF and had serious discussions with it which lasted for most of the day. I was able to ensure that alternative cover could be provided for companies which had not been insured in this country by any of the Irish operating companies for at least seven years.

At what cost?

We were able to get the cover. If we had not, the companies would not have been able to operate.

At what cost?

I did not interrupt anybody. I am making my speech. The Deputy can make his speech when he gets the opportunity to do so. I realise that the Deputy is in the business. I do not know if he is an insurance agent but many people have responsibilities in this area.

On 21 June, I met several of the affected parties about this situation and advised them as to what I thought they should do. The Government has been able to ensure that private policyholders in Ireland will be entitled to protection under the UK financial services compensation scheme. While this covers only 90% of any claim made against a policyholder, the Motor Insurers Bureau of Ireland will cover the 10% shortfall in respect of third party motor claims. Unfortunately, commercial policyholders in Ireland are not eligible for cover under the UK scheme. They will be eligible as creditors for whatever percentage of claims the liquidator can eventually pay from the company's assets.

I have met representative groups and some of the commercial policyholders of IICL. I am awaiting full details of the exposure of Irish business as a result of the collapse of IICL. When I receive that information, I will consider the situa tion further. However, I do not wish to mislead the House or companies and individuals who find themselves in an unfortunate position. We do not consider that it is appropriate to ask the taxpayer to fund an intervention in this matter.

The IICL collapse illustrates the need for companies, which, unlike private consumers, normally can expect to have access to in-house sophisticated financial expertise and advice, to be careful where they place insurance. The very competitive rates being offered by IICL on the Irish market were welcome. However, perhaps the subsequent collapse of the company goes some way to explain how such competitive rates could be offered in the first place to unsuspecting clients for over seven years. Some clients paid three years premia in advance.

The gap in the EU's legislative framework in relation to the position of policyholders in the event of the failure of an insurer writing cross-Border business had been brought to the attention of the EU insurance committee by Irish officials long before the failure of IICL highlighted that gap. Discussions have begun with a view to EU agreement on an appropriate compensation mechanism. However, this is unlikely to be of practical assistance in the present case.

The Irish supervisory authorities continue to pursue a policy of not tolerating insurance company failures. The supervisory regime is kept under constant review to ensure that it is sufficiently robust and searching to support the no-failures policy. The reforms instituted in 2001, after an IMF survey of our regime, will play their part in assisting us to maintain our record of no failures since 1984.

I appointed the Motor Insurance Advisory Board in September of 1998, with a broad membership that is representative of the various groups interested in motor insurance, including representatives of consumers, insurance brokers, commercial motorists, young drivers, the Garda, the Department of Justice, Equality and Law Reform, the Department of the Environment and Local Government, the Department of Enterprise, Trade and Employment, driver trainers, accident victims, the motor industry and, of course, the insurance industry. This excellent board is chaired by Ms Dorothea Dowling, claims manager of CIE, and one of the board members is a professional statistician.

I am prepared to take any abuse or blame to which I am entitled and I have no difficulty with that. However, I take issue with Deputy Rabbitte on two points. Prior to 1993, the Motor Insurance Advisory Board consisted of representatives of the IIF, the IBA, a statistician from the CSO, an official from the Department of Enterprise, Trade and Employment, who acted as secretary, and a representative from the Automobile Association. The board produced annual reports on the basis of data from the IIF. The last report produced by it prior to my reforms was in 1993. Deputy Rabbitte was in office for three years and he had no meeting with the MIAB. He did not take action on its report and there is no point in him blaming me for the initiative that I have taken or for the fact that it has not concluded its work. The Deputy had the report although I do not know whether he looked at it – that is his business. There was no meeting of the board during Deputy Rabbitte's entire term of office. That is thede facto position.

The board is in the course of finalising its report to me on motor insurance issues generally and on the relationship between the premiums charged to each category of driver and the claims experience for that category. I expect to receive the report next month. When it is presented to me, I will give urgent consideration to the board's recommendations and make appropriate proposals to Government. I am aware that there is a high degree of public interest in this report. Therefore, I will be publishing it as soon as the Government has had an opportunity to review it in detail.

It is premature to speculate as to the impact which the report and its recommendations may have on the cost of insurance for young drivers. EU law prevents us from intervening in matters of either the pricing or underwriting of insurance. However, I am confident that the report will provide some transparency as to the relationship between risk and premium charges in Ireland. As I have said, the single market has not resulted in significant new underwriting capacity on the Irish market. One of the reasons for this may be that EU insurers may believe that the Irish market is too difficult and unprofitable.

Given the greater transparency provided by the MIAB report and given that the insurance cycle is in an upward phase, the Single Market may facilitate developments in the insurance market akin to the Bank of Scotland's intervention in the mortgage market. Research into the difference between the high price of insurance in Ireland and the much lower price of insurance in other EU member states linked the high cost of insurance to the high cost of settling personal injury claims in this country. The cost of delivery of compensation, almost entirely made up of legal costs, now runs at approximately 40% of the value of claims. In cases of amounts up to €15,000, the cost of delivery may equal the amount of compensation.

The objective of the Personal Injuries Assessment Board is to reduce the delivery costs in personal injury cases by reducing the number of cases that enter the legal system to achieve settlement. Since the insurance industry estimates that it pays out €800 million per year in legal fees alone, the savings that would be achieved by a PIAB could be considerable.

In March 2001 this Government approved the establishment of a PIAB and the setting up of an interdepartmental implementation group to progress its establishment. The group has made good progress in its examination of operational issues and the possible legal implications surrounding the establishment of the PIAB. I expect to receive the group's report in the next month or so.

Again I have to take issue with Deputy Rabbitte who, in December 1996 when he was Minister of State, set up the special working group on a personal injuries tribunal. Its first report was published in April 1997 and consisted of a majority and a minority report. It was decided that the group should take up the second part of its mandate, to examine alternative systems of delivering personal injury compensation. Deputy Rabbitte led the House to believe that he created the group, got the report, put a structure in position and had it ready to roll. These are not facts. The McCauley group took up the second part of the terms of reference, which were agreed at the request of Deputy Rabbitte when he was Minister of State, to recover from the embarrassment caused by the minority report. These are the facts concerning what I inherited and they stand.

Why did the Minister of State not set up the first part of it?

Deputy Rabbitte had the opportunity of dealing with it. He had a minority and a majority report. There was a division on the board which he was unable to handle. He passed on the soft ball and gave them the second option.

In conclusion, a Cheann Comhairle—

I did not have to bring in a civil servant to give notes to me.

Deputy Rabbitte's problem is that he did not respect civil servants. He brought in outsiders and they gave him the notes. I remind Members that this Government has devised a policy for tackling high insurance costs that is realistic and does not look to quick fix responses which are not solutions in the longer run.

In relation to the rates charged to young drivers, the MIAB will establish the facts of the relationship between claims costs for these drivers and the premium rates being charged. I fully understand the difficulties experienced by many young people and the need for many of them, especially in rural areas, to have access to competitively priced insurance so that they can travel to work. For this reason, I welcome the fact that some companies have introduced special initiatives designed to offer insurance to young people who are prepared to accept certain constraints or conditions at favourable rates. I have worked assiduously on some of these projects over several years. Market research and other sources concluded that they were not viable commercial alternatives.

While I acknowledge that these schemes are fairly restricted at present I hope that they will prove so successful that they will become more common throughout the country in the years ahead. We have made good progress in reducing the incidence of accidents, both on the roads and in the workplace. We have in place the means to continue to achieve reductions in these areas and we will expect to see these declining accident levels reflected in future insurance premium charges.

I am confident that the MIAB report will make a major contribution not only by informing the debate but also by providing information about the cost of risk which may encourage new players into our market. The PIAB will make a substantial contribution to reducing the cost of claims by reducing the need for legal involvement in the settling of personal injury claims. Since the cost of legal involvement may well account for €800 million of the total cost of claims settlement at present the savings that may be achieved by the PIAB are considerable. Accordingly, I recommend the Government's amendment to this House.

I wish to share my time with Deputies Belton, Naughten and Hogan. I welcome the opportunity to discuss this very serious issue and compliment the Labour Party on putting down the motion.

Over the last number of years the whole issue of insurance costs in this country has been highlighted by many people. The cost of insurance has become astronomical since the collapse of the Independent Insurance Group and the tragedy of 11 September. As a public representative many people have contacted me regarding the cost of insurance. It affects almost every family.

I have listened to the Minister of State and it seems incredible that after four and a half years this problem is getting worse. These are the facts. Four and a half years ago insurance costs were a problem to young drivers, but they have increased dramatically during that time, as they have for business people. Unfortunately, nothing has been done about this.

Affordable insurance is no longer an option for many people. Many young people who wish to have a car are prohibited from doing so by the cost of insurance. A car is not a luxury but a necessity for many young people living in rural areas. The Minister of State knows this. I can give an example from last year. Three young men from my local area were lucky enough to get work in the vicinity. Each of them tried to buy a car but the insurance costs were greater than the purchase price of the cars. They are all in England now because that is the only place where they could find work while depending on public transport. In rural areas there is no public transport and the continuing astronomical cost of car insurance prevents people staying in the area.

There are a couple of things the Minister of State could and should do. He should request the Competition Authority to carry out a study into competition issues in the motor insurance industry under section 11 of the Competition Act. He could consider the establishment of an independent insurance ombudsman who is not paid for by the insurance industry. Many people who look for insurance now are not even quoted. There is a cartel in this industry. If an independent ombudsman were established the situation could be investigated fairly. This does not happen at present.

Many small family-run businesses have contacted me in the last couple of months about the massive cost of insurance. There were increases of over 50% and 60% last year. Some places are expecting an increase of up to 100% this year. No small business, or even a medium business, can sustain this. Not only is the cost great but there will be job losses, unfortunately, unless something is done.

Another issue that I find difficult to deal with is the insurance industry itself. I ask the Minister of State to investigate it. Many businesses have contacted me. One of them told me that an individual came into his shop and claimed the he fell and hurt his back. The shopkeeper wanted to go to court to state his view that the injury sustained did not merit the compensation sought, but his insurance company advised him to settle the case out of court. The businessman refused this and requested to go to court, but the insurance company would not agree. It settled out of court for £16,000 to the claimant. The businessman was mesmerised by this and the following year his insurance costs increased by 45%. It is no wonder the insurance companies do not want to go to court if they are settling at that level, but it is the customer who pays. That is grossly unfair. It is for that reason I believe there is a cartel in the insurance industry.

We must be more aggressive. Until there is fair and equitable competition in the insurance industry, the difficulties outlined this evening will continue.

We have discussed this matter with the Minister of State on more than one occasion over the past year and I am disappointed with the response tonight. It offers nothing that was not said six months ago.

There are issues that could be examined. The Minister of State and everyone else connected with the insurance industry admit that 40% of claims paid out goes to the legal end of the business. It does not all go straight into the pockets of the legal people who employ others, but the injured party does not receive 40% of any pay out. It reminds me of the showband days when Big Tom got 40% and the sponsors on the door got 60%.

Some of the sponsors are Members of this House.

It does not make sense. It is not the fault of the Minister of State, but he has done nothing to tackle the issue. We can talk about lobbies in this House – farmers, publicans, footballers, horse racing – but the legal lobby is the strongest and does not want to be touched. The Government and the Minister of State do not want to touch it.

That is not true.

That is the reason there has been such a delay in dealing with the matter. The Minister of State said he will establish a personal injuries assessment board. Why has he not done so already? He has talked about it for a long time and there is nothing to stop him from doing so.

Attorney General McDowell.

It is nice to talk about these matters; it has been the policy of the Government – shadow, but no substance. These ideas look fine projected onto a screen, but nothing ever happens.

There are outside factors; we all know what happened in the United States and that it put enormous pressure on the international insurance business, affecting business here and resulting in the insurance companies laying staff off. For the Minister of State to say, however, that the Government has reduced the number of fatal and other injuries on the roads is to appear cynical. There has been an improvement in the road system on which a large amount of money has been spent.

The Deputy's five minutes are concluded.

We were given an extra five minutes.

The Deputy's colleague, Deputy McGrath, wishes to use five minutes.

It is as difficult to have time allocated as it is to get insurance. I will talk to the Minister of State about this issue again.

The Government has singularly failed to address the issue of the spiralling cost of car insurance in the State. The long promised penalty points system will not be in place for a further 12 to 18 months, even though the Government was committed to having it in place by 1 January this year. The personal injuries assessment board, announced in March 2001, to address the high legal costs associated with insurance claims, will not be in place for a further 12 months. It will be at least 2004 before it deals with car insurance claims. The Motor Insurance Advisory Board, which is investigating the high cost of insurance, was due to report in June 2000. It is now two years behind schedule.

The Government has failed to take one step to address the high cost of insurance in the last four and a half years. It is strong on hot air, but weak on action. The Minister of State admitted in the Dáil earlier today that sectors of the car insurance market are profitable, including a section of the young drivers' market, but what has he done about it? The answer is very little. The cost of insurance has increased by more than 50% in the last three years.

The Minister of State has turned a blind eye to the blocking of the work of the Motor Insurance Advisory Board by the insurance industry. The board was established by the Minister of State, but has been blocked in its work by the lack of information furnished to it by the insurance industry and he has done nothing about it. He has paid lip-service to the establishment of a personal injuries assessment board. There has been a contraction in the market, with only five general insurers at present.

The Minister of State has sat on his hands for the last four and a half years. The Government could implement four basic steps in the next four months to address the cost of car insurance. The personal injuries assessment board must immediately deal with car insurance claims. The Government should introduce the penalty point system, the legislation for which has been gathering dust for 12 months. It should use the 2% levy collected off the backs of those paying insurance to train and educate young drivers. The Minister of State should commit himself to the establishment of a statutory insurance ombudsman to ensure there is an independent assessment of the rapid rise in the cost of car insurance. An insurance ombudsman is the only way we can access the information urgently needed to address the spiralling cost of insurance.

The insurance companies are legally obliged to quote anyone seeking insurance, but the high risk sectors, such as younger and elderly drivers, often receive astronomical quotations forcing them not to take out insurance. The industry uses these quotations to refuse insurance to young and elderly drivers. It picks figures from the sky and abuses the current legislation. The only way to put manners on it is to establish a statutory insurance ombudsman. The Minister of State's colleague, the Minister of State at the Department of the Environment and Local Government, Deputy Molloy, has been critical of the insurance industry. Road deaths and the number of accidents have decreased, but there has been no recognition of this by the insurance industry.

The Minister of State has had many opportunities to do something over the last four and a half years, but all he has done is produce report after report. Deputy Flanagan pointed out earlier today that the Minister of State cannot give one example of a decision he has taken to address the issue of car insurance. The Minister of State could not answer; neither can the Government. The young people who pay car insurance will answer the Government at the polls in the next few months.

I welcome the Labour Party motion on the appalling developments in the insurance market. It pinpoints the failure of the Government to deal with escalating premia since it took office.

There have been promises, commitments and committees to examine the matter but no action has been taken. The result is disastrous for business and young drivers.

The facts speak for themselves. Nobody under 21 years of age can get a quotation for motor insurance cover in their own name. For example, a 21 year old male sought cover for a 1998, 988cc Nissan Micra. He was quoted €4,449.19 for comprehensive cover and €3,454.99 for third party fire and theft cover. For an equivalent female driver the premiums quoted were €1,953.22 for comprehensive cover and €1,660.32 for third party fire and theft cover. That represents a trebling of the premia for that category of driver in the last six or seven years. It requires serious investigation which, unfortunately, the Government has done nothing about. Is it any wonder that increasing numbers of young drivers have no cover and that there is an increasing burden on the Motor Insurance Bureau when they have an accident?

Motor insurance cover has, on average, increased by 35% in 2001 and for certain categories of cover the increase has been 100%. An increase of 25% for 2002 has been announced and more will follow because, contrary to what the Minister of State has said, there is less competition in the market. Generali has withdrawn and the Independent Insurance Group has collapsed. There are no replacements, which is a worry for small businesses and for the motor insurance market.

The collapse of the Independent Insurance Group has exacerbated the appalling situation for small businesses, especially with regard to employers' and public liability cover. Unlike the UK, there is no licensing arrangement here whereby the State could use some of the funds accumulated from the 2% levy, which has effectively become a tax on the motor insurance industry as it has achieved its original purpose of providing financial help to mitigate the collapse of the PMPA. Many small businesses will have to cease trading because of the escalating costs of insurance. I have come across many people in business, especially in small businesses, on a daily and weekly basis who mention this problem to me.

The Government's response is callous and demonstrates it is out of touch with the problems being created by rapidly increasing costs in the insurance sector. The Small Firms Association and ISME now publicly speak on the matter. They would not do so unless it was a serious issue for their members.

Nothing will be done by the Government to deal with the legal and court costs associated with claims as well as the liability accidents that give rise to large claims because it is too beholden to vested interests. Legal and court costs contribute enormously to the cost of claims, and engineers, doctors and those in the legal profession have a vested interest in keeping this gravy train going. The country and the Government must tackle this problem if we are serious about creating better competition, bringing more insurance companies into the market and reducing the costs associated with claims. After four and a half years in office and unprecedented resources at its disposal I can only conclude that this Fianna Fáil and Progressive Democrats Government is satisfied to leave things as they are and allow people, be they young drivers or in business, to continue to suffer from high costs and lack of competition in the insurance and business market.

There is no point in the Minister of State blaming the events of 11 September or saying certain companies have pulled out of the market. Others will do so if the State does not regulate it as it should. There is no point in the Government telling us what it will do. It has been in office for four and a half years and it must explain what it did in that time when it had the opportunity to act. The Minister of State has run out of ideas. In the meantime, businesses and young motorists must pay more and shut up.

I thank my colleagues for sharing their time with me and I compliment Deputy Rabbitte for introducing this motion. It is very timely because there is a crisis in the insurance industry. Young people find it impossible to get car or motorcycle insurance or any mode of cover that will give them transport to and from work. Many examples have been quoted in this debate.

It is impossible to believe that young people, some of them graduating from university to well paid jobs, who need a car for their work and who have the money to pay for the car are crippled by the insurance costs. It is totally unacceptable and it must be addressed. Will the Government outline what it has done to address this problem? I am long enough a Member of this House to know it has been present for a long time and is increasing. Even the cost of putting young people on motor insurance cover as named drivers is prohibitive. It costs in excess of £1,000 to do so, or £20 per week, which is enormous.

Employers are experiencing great difficulties with regard to employers and public liability insurance. The Small Firms Association wrote to its members on the issue outlining that it met with the Minister of State, Deputy Treacy, the Minister for Finance, the Minister for Enterprise, Trade and Employment and the Taoiseach to inform them of the very serious nature of the problem. What has happened since then?

In its letter the SFA says that insurance costs increased by an average of 41% in 2001 and the prospect is for a further 50% increase in 2002. It goes on to point out that if this situation is not resolved many companies will not be in a position to trade. A progressive family business in my area with approximately 60 employees had an insurance bill of €63,000 in 2000. Last year the quote for insurance cover amounted to €110,000 and for this year it will be €180,000. In three years the company's insurance costs have almost trebled. Although there is a serious injury claim against the company it begs the question why insurance is being paid in the first instance.

I know of one person who uses his car for business purposes and who has paid approximately €4,000 per annum for his insurance. Although he was involved in an accident that was not his fault – there was no claim against him – he has been quoted €13,000 for insurance cover for the coming year. How can he be expected to continue in business with costs of that nature? It is impossible, yet what is being done about it?

We can point to higher claims but in the letter to its members the SFA says that a recent survey analysis shows the rate of accidents among small businesses has fallen but costs associated with them have soared. It points out that 76% of respondents said their claims experience had not changed, 15% said their claims experience had improved and 9% indicated an increase in claims. Yet, there have been huge increases in the cost of insurance cover. The letter goes on to say this must stop before thousands of people are put out of business and tens of thousands are made unemployed. What has the Minister done to address the problems experienced by the private sector in relation to ordinary car insurance and by the business community in relation to employers' liability and public liability and the huge costs associated with it? When will the Minister outline to the House his achievements in that area?

Debate adjourned.