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Dáil Éireann díospóireacht -
Tuesday, 5 Nov 2002

Vol. 556 No. 3

Priority Questions. - Insurance Costs.

Phil Hogan

Ceist:

65 Mr. Hogan asked the Tánaiste and Minister for Enterprise, Trade and Employment her views on comments from the Insurance Industry Federation indicating that insurance costs may not be reduced in the light of the reforms that she has initiated; the action she intends taking to compel the insurance companies to compete and reduce premia as a consequence of her initiatives; and if she will make a statement on the matter. [20474/02]

The Tánaiste announced a programme for fundamental insurance reform on 25 October 2002. While EU law would prevent the Tánaiste and the Department from compelling insurance companies to reduce premia, it has been made clear that there is an onus on the insurance industry to ensure the reforms to be taken will have the effect of significantly reducing the cost of premia to consumers.

On the question of competition, the Tánaiste expects the study to be undertaken jointly by the Department and the Competition Authority to provide important pointers as to the reasons there are not more foreign insurers willing to underwrite insurance in Ireland.

It appears the Tánaiste and the Department of Enterprise, Trade and Employment allowed insurance company mergers to take place without a whimper. This has created deep-seated unease among consumers because of the small number of companies now quoting for insurance – only four compared to 17 or 18 previously. In the reform package she announced on 25 October, it was indicated that a Personal Injuries Assessment Board would be established, but that will not happen for 18 months during which time an interim board will operate. In other words, in that time, nothing will happen to reduce the cost of litigation or bring awards into line with those in our neighbouring jurisdiction.

In her press release the Tánaiste indicated she would bring about a 31% reduction in insurance premia over three years. How will she achieve this? Did she have any discussions to reach agreement with the Insurance Industry Federation for a quid pro quo concerning the various measures it should take in response to her initiatives?

Neither the Tánaiste nor the Government as a whole can force the insurance industry to set its premia. In addition, this country cannot hold back the worldwide rationalisation process in the industry which simply mirrors what is happening here. The reason there is not more competition here is that it is not a profitable market for the insurance industry. The initiative being taken by the Department and the Competition Authority will examine the reasons the insurance market has not been profitable, and tackle the problems involved in line with the MIAB's 67 recommendations.

A specific timeframe for delivery has been outlined on which the interim PIAB will deliver over the next 18 months. It would be incorrect for the Deputy to suggest otherwise. The stakeholder responsibility for delivery, and the associated timeframe, is clearly set out in the action plan.

The insurance industry has been asked to respond to those initiatives, particularly that being taken in respect of the cost of claims, including processing, legal and medical costs etc., which are all being tackled. The action plan, as the Deputy stated, suggests there has been a 31% increase and underlines the assumptions on which this figure is based. Therefore, there is no reason to believe we cannot achieve that reduction of 31%.

In addition, in the area for which I have responsibility, namely, health and safety, it is quite clear that there is a very considerable level of fraudulent claims being made in this country. We, together with the Department of Justice, Equality and Law Reform, intend to bring about a number of immediate initiatives to deal with fraudulent claims and, in particular, to deal with claims in the area of public liability which, as we have seen with some recent very high profile cases, are causing insurance costs to be much higher than they should be.

The Minister of State has indicated that the Minister received no agreement whatsoever with the insurance companies and that, in return for the reform package and measures the companies were seeking from the Oireachtas in terms of legislative and health and safety changes and legislation to deal with fraudulent claims, which I support, they have promised to do nothing. In other words, we are getting nothing in return, except the Minister urging the insurance companies to do X, Y and Z. This is the most politically naive act on behalf of the Minister and the Government that I have seen in my time in the Oireachtas, to expect a major reform package to be put in place and not to get any return at all or any deal with the insurance companies in response to the measures urgently required to reduce insurance premia to consumers, motor owners and businesses. She did not even get a measure of solidarity from the insurance companies that they would, in turn, spell out exactly in a proper timescale what action they would take to meet the objectives of a 31% reduction in premia.

The Minister, in speaking about insurance companies reducing premia by such figures, is in cloud cuckoo land when there has been no deal made with them whatsoever and no guarantee that she will get any action from the insurance companies arising from this reform package. Would the Minister of State agree that it is the greatest form of political naivety to expect the insurance companies to act at the urgings of a Government or a politician at a time when this House is expected to make certain legislative changes they seek in order to reduce the cost of litigation, claims, compensation awards, etc.? Would he agree that if we bring in those measures they will effectively tell the Minister and the Government to go to hell?

Premia in the future, as in the past, will be determined by a combination of the underlying claims experience and the competitive conditions that apply. Even the persuasive powers of somebody like Deputy Hogan would not be sufficient to overcome that fundamental point.

I would expect to do a bit of a deal. I would not use persuasion: I would use a big stick.

We have to prove to the insurance industry that we are in a position to put in place the conditions which will allow for a less claims conscious and more competitive regime. The fact is that Ireland is the most claims conscious society in Europe. There are much higher levels of damages being paid out in Ireland because of our legal system and we must change that.

The Minister should have done something about that. They had five years and did nothing.

That is the fundamental change that is being made by the Minister and I am absolutely confident it will work.

It is taking them too long.

We have run over the time. We must proceed to Question No. 66.

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