I move:
That Seanad Éireann calls on the Government to introduce urgent measures to bring down the cost of motor insurance for young drivers.
I am grateful for the opportunity to bring this matter before the House. I had hoped that because the motion was phrased in such non-contentious terms it might not have been subject to an amendment from the Government. I had no ambition to put down a motion which is contentious or adversarial. I hoped it would be agreed so that we could go away with a joint resolve to act in the interests of young drivers.
I am disappointed by the Government amendment because I had thought the placing of this subject in the programme for Government as a matter of great urgency to both parties was genuine. This amendment indicates that the delay we have witnessed already in bringing down the price of premiums, which has not happened, may be an indicator that we will not see much action on this issue in the lifetime of the Government. Some of the initiatives referred to in the amendment may become instruments of delay and I am disappointed in that regard.
Car insurance is a particularly special product for one reason, that is, it is compulsory. Everybody who wants to hold a driving licence is compelled by law to go to privately run insurance companies, which are under very little compulsion by law. That may make me sound like some sort of an interventionist in the free market, which I have always have been – although Senator O'Toole may not be – but when people do not have any choices, the Government has the option to police this area properly and ensure it does not exploit the those who are compelled to be part of that process. Car insurance is an example of where people have been exploited by one of the great cartels. It is different from the banks, which benefit as cartels from the inertia of their customers and from the fact that none of us like to switch around because of laziness, fear, culture, cost and other complicated reasons. However, it is not the same in the case of car insurance.
Everybody who wants car insurance has to get a licence. What does that mean in modern Ireland and in the current situation? It means that young people, who are the most vulnerable, are being exploited. Young men and women are being exploited in different ways by the insurance companies. The premiums they pay are extremely high by any global or European standards.
Nobody will maintain that, in statistical terms, young men in particular are not the most dangerous group of drivers. As everybody has seen, the statistics show that what are called the responsibility rates for young drivers – particularly young males – are extremely high. The second highest responsibility rates are among young women. The insurance companies have seized upon these responsibility rates and have imprinted them on the public mind so successfully that they have been able to punish these young people with exorbitant rates, proportionately far higher than the number of accidents which they cause, according to the statistics. The safest group is older women, the second safest group is the middle aged, the third is younger women and young men are the most dangerous. Statistically, the situation is now such that insurance companies and the public can justify penalising young drivers to such an extent that they cannot get insurance. I do not think this is justified.
Insurance companies are exempt from the Equal Status Act, rightly or wrongly, and the criteria which they use are age, gender, class – a job, in other words, which is class to some extent – and location. I suggest they ought to use the safety record as the priority in respect of a young person. The age criterion which they use is an extraordinarily crude instrument. What about the young men and the young women who have seven years of safe records? That is possible for a 25 year old. Those people are being penalised for the very dangerous people who are in that group. That is unfair. Those people should not have to pay for the excesses of other young people or of older people. There a lot of very dangerous drivers amongst the aged and the middle aged.
The Irish Farmers Journal recently published a table giving the example of a 24 year old man with a provisional licence who went to various insurance companies. The first company, AXA, refused him on the grounds that he should be over 25 years of age. Eagle Star and First Call Direct refused to give him a quote because he was under 27 years of age. Quinn Direct accepted him and quoted €4,000 third party fire and theft. This is ridiculous. The company asked only for his age. Hibernian and One Direct did not quote as he did not have four years no claims bonus. FBD does not quote for provisional licence holders. There are various other issues involved there such as whether provisional licence holders should be allowed to drive at all.
If one took the example of a young woman in that situation she would receive more quotes but her quotations would certainly be higher than the value of the car. This is serious discrimination. If one were to use the example there of someone who had a full licence the person would receive more quotes but the premiums would be utterly unacceptable. The result of this is that young people who have to drive have to borrow money and get into debt to get insurance, which is current expenditure, thus putting themselves into a very difficult financial situation.
The statistics that I have seem to show that a young man with a provisional licence is only a third more likely to have an accident for which he is liable than an old woman, who is in the lowest risk category. That would indicate that his premium should be about a third higher than hers. This is not the case. His premium is significantly higher.
That is a very brief summary of the problems, and the victims and groups who are suffering under this regime. The difficulty is that this problem has existed for a very long time. It has been discussed but a solution is difficult to find in what is supposedly a free market, yet there are things which could be done immediately which might force insurance companies to reduce premiums or which might allow more competition in the market. The first is to improve driving standards. I welcome the Government's decision to introduce penalty points. That is part of the amendment, which is absolutely unnecessary, but that initiative is something on which I think we all agree. It has reduced the number of accidents and will continue to reduce the number of accidents and fatalities. It is an initiative which has taken courage and has worked very quickly. This type of problem needs to be tackled with the sort of courage with which the Minister for Transport has tackled the penalty points issue.
The alcohol limit should be reduced to zero, certainly in the case of provisional drivers. That probably will not happen because of the strength of the alcohol lobby group. Provisional drivers should not be on the roads. Costs should be cut in this industry, for example, legal costs constitute about 42% of the claims made by insurance companies. The compensation culture, whereby people make fraudulent claims and get huge sums of money, should be reduced but above all there should be competition in the market.
Everyone here knows that this issue has been referred to the Competition Authority. No doubt the Minister of State will mention that in his speech. The Competition Authority will report on this issue in a year's time at the earliest and when it reports some think tank will be set up to consider it and it will come before some committees of the Oireachtas. It will be another two or three years before legislation is introduced and although the MIAB reported on the issue over a year ago there will be five years between that report and legislation.
We do not need a Competition Authority report. This issue has already been tackled. What we do need is more competition in the market – I wish I had time to elaborate on this – so that the insurance companies could not run this extraordinarily privileged cartel which allows them to charge people who are compelled by the Government to have insurance.
I regret and oppose the amendment. I applaud some of the sentiments in it but not the action in it. I oppose it particularly because of one sentence, "recognising the serious implications of the events of September 11th in the US for the global insurance industry particularly the costs of re-insurance". What has that got to do with motor insurance? That is an apology for the activities of the insurance industry and I do not want to hear this or any other Government apologising for this industry which has had its own way for too long. For that reason alone I would oppose the amendment. I hope that this debate will prompt urgent, constructive measures from the Government, not waffle about how they share the sentiments which I have expressed.
Senator Joe O'Toole, who incidentally has been appointed to the PIAB and we should congratulate him, will second the motion.