Dáil Éireann Debate, Thursday - 21 January 2016
54. Deputy Arthur Spring asked the Minister for Finance if the insurance industry has explained the increased cost in car insurance to him; if the insurance industry is profiteering; and if he will make a statement on the matter. [2587/16]
Amharc ar fhreagraAs Minister for Finance, I am concerned that there should be a stable insurance sector and that risks to policyholders and to the wider financial system are limited. I am aware of reports on the increasing cost of motor insurance. However, the ability of the Government to influence insurance pricing is limited as insurance companies are required under European law to price in accordance with risk and neither I, as Minister for Finance, nor the Central Bank of Ireland, have the power to direct insurance companies on the pricing of insurance products.
I raised the issue of the cost of insurance, and particularly the rising cost of motor insurance premiums with representatives of the insurance industry, at a meeting in my Department on 3 December 2015. They indicated that a number of issues are feeding into increasing insurance costs. The insurance industry view is that High Court awards have increased and that the Personal Injuries Assessment Board (PIAB), which it believes is a very good mechanism, does not appear to have the same influence on claims awards that it used to have. The industry is also of the view that legal costs are generally up with approximately 60% of the cost of claims being apportioned to legal expenses. Furthermore, it was indicated that as economic activity speeds up claims activity also increases. Finally, the industry is estimating that that recent Setanta/Motor Insurance Bureau Ireland court ruling could add further to insurance costs.
The Central Bank advises me that competitive conditions within the insurance market intensified in recent years and that many firms focused on maintaining market share which provided impetus to lower premiums. Competition on premiums was subsidised by investment income and other measures. Recent reversals in investment markets have generated investment losses that are a drag on profitability. In the view of the Central Bank, the recent premium increases are aimed at restoring core underwriting profitability and securing the financial position of the firms concerned for the longer term.
While the provision and the pricing of insurance policies is a commercial matter for insurance companies, this does not preclude the Government from introducing measures that may, in the longer term, lead to a better claims environment that could facilitate a reduction in claims costs.
The question of the cost of insurance is a complex one involving a number of Government Departments, State Bodies and private sector organisations. I have asked my officials to examine the factors which contribute to increasing costs of insurance. This work is part of an overall review of the insurance sector which my Department will undertake in consultation with the Central Bank and other Departments and Agencies. This work will continue over the coming months and will involve engagement with a number of parties, both public and private.
