Vol. 570 No. 2
71 Mr. Howlin asked the Tánaiste and Minister for Enterprise, Trade and Employment if her attention has been drawn to reports that the growing cost of insurance has forced a number of major companies to stop paying premiums and that they are self-insuring; her views on this practice, especially in view of the potential commercial and legal implications; the steps she is taking to ensure affordable insurance; and if she will make a statement on the matter. [18629/03]
I apologise for the Minister's absence because she is indisposed.
We will miss her.
While a number of large organisations have self-insured for many years, I am aware of reports that more companies are self-insuring. This does not involve complete self-insurance in many cases, as the company carries the risk up to a certain financial limit with cover in place against large liabilities. Public or employer's liability insurance cover, while not compulsory, is advisable to safeguard the solvency of the enterprise in the event of claims for damages or personal injury. Companies deciding to self-insure need to consider their risk exposure very carefully.
On 25 October last, the Minister announced a comprehensive programme to reform the insurance market and drive down premiums both for businesses and consumers in general. The programme comprises an interrelated set of measures designed to improve the functioning of the Irish insurance market.
The key measures include implementation of the recommendations in the Motor Insurance Advisory Board action plan within a target timeframe. To date, 15 recommendations have been implemented and work is progressing on the implementation of the other recommendations: the establishment of the personal injuries assessment board – the Government has recently approved the drafting of the general scheme of the Bill to place the PIAB on a statutory footing and it is hoped to enact the legislation by year end; a civil liability and courts Bill to be introduced by the Minister for Justice Equality and Law Reform, which will include measures to deal with spurious or exaggerated claims and improve the functioning of the court system in dealing with insurance litigation; a new road safety strategy to reinforce the impact of penalty points is being formulated by the Minister for Transport; and, finally, my Department and the Competition Authority are undertaking a joint study into the insurance market. The study will identify and analyse barriers to entry and limitations on rivalry in the insurance marketplace. It is envisaged that the bulk of the work will be completed this year and that a report will be produced in the early part of 2004.
The Minister chairs the ministerial committee established to drive the co-ordinated implementation of this reform programme across the relevant Departments and other bodies concerned. Substantial progress is being made on a range of measures that will radically overhaul the functioning of the insurance market and help tackle the high cost of insurance. The pricing and underwriting of insurance, however, is a matter for individual insurance companies and EU law prevents governments from intervening in regard to premium levels or in respect of what risks they are prepared to underwrite.
Additional Information.Insurers generally make decisions about whether they are prepared to quote for a particular risk and, if so, at what premium level, based on their underwriting experience or assessment of that risk in the market. The Minister has made it clear that she considers there to be an onus on the insurance industry to ensure the reforms being undertaken will have the effect of significantly reducing the cost of premia to businesses and consumers.
Did the Minister of State read the evidence given to the Oireachtas Joint Committee on Enterprise and Small Business when it dealt with this matter? Did he read in the national media the passionate and trenchant comments made by representatives of the business sector, particularly those of my county man, Liam Griffin? Is he aware of the risk such people are forced to carry? Is he aware that his comments that Mr. Griffin and all the others who are self-insuring should consider their risk exposure carefully will drive them to distraction? These people cannot sleep at night because they are considering carefully their risk exposure. However, because there has been no action from the Government, which has been continually in office for six years, to deal with the issue of spiralling insurance rates, these people are at their wit's end. They will be driven to distraction when they read tomorrow that the Minister advises them to consider carefully their risk exposure.
Will the Minister acknowledge, as the hotels federation has told the committee, that insurance premiums have risen by 351% for guest houses and hotels in the past three years? It is all well and good for him to say that these reports are coming and all these reviews are happening, but we are still at the drafting stage of a Bill for the personal injuries assessment board. We have not seen sight nor light of the courts Bill – where is it? It is not good enough for the Government to drag its heels further on this issue which is affecting people who are living day to day on their wits, hoping and praying that there will not be a catastrophic claim against them that will wipe them and their personal houses and family well-being out of existence.
I saw the reports of the meeting in question and had a comprehensive meeting with the chairman of the committee. The Tánaiste and I met the group on one occasion and I met the group separately in the context of my responsibility for health and safety in the workplace. We all agree that premiums being charged by insurance companies, particularly in the past two years, have gone completely out of control. However, the set of measures identified by the task force and the measures now being implemented out I outlined, is the only way to deal with the spiralling cost of insurance. If the Deputy has any other ideas he believes could make an impact, we would all like to hear them.
We must face up to the fact that the main reason for the large increases in insurance premiums are the level of claims, particularly spurious exaggerated and false claims. The recent "Prime Time" programme was a good example of rampant fraud, exaggeration and spurious claims being made right across the spectrum. The initiative being taken as a result of the task force report and the range of legislation being introduced in three Departments will comprehensively deal with that problem.
There is still the difficulty of competition in the marketplace. The most significant challenge is the joint study being undertaken into the insurance market by my Department and the Competition Authority. I met recently with several insurance companies and it is quite clear that in the past insurance companies lived off the profits of their investment and paid out willy nilly. That is now changing. Cases are being challenged inside and outside the courts and I am confident there will be a reduction in premia. In the meantime, we must acknowledge that people are self-insuring. It is fair to point out, however, that they are self-insuring up to a level and the higher levels of liability are being covered by those companies which are self-insuring.
