Dáil Éireann Debate, Tuesday - 6 November 2018
193. Deputy Eamon Scanlon asked the Minister for Finance if his attention has been drawn to situations in which insurance companies have exaggerated the size of payouts in order to increase premiums; if a taskforce will be established to investigate the increase in premiums; the amount insurance companies paid out in claims between 2015 and to date in 2018; and if he will make a statement on the matter. [45191/18]
Amharc ar fhreagraAs Minister for Finance, I am responsible for the development of the legal framework governing financial regulation. Neither I nor the Central Bank can interfere in the pricing of insurance products, as these matters are of a commercial nature, and are determined by insurance companies based on the risks they are willing to accept.
However, it is acknowledged that pricing in the insurance sector has been subject to volatility in recent years, from a point where some premiums appeared to be priced at an unsustainably low level in the motor sphere to the more recent experience of large increases across a number of lines.
The problem of rising insurance premiums was the impetus in 2016 for the establishment of the Cost of Insurance Working Group which is now chaired by the Minister of State for Financial Services and Insurance, Mr. Michael D’Arcy T.D. Its Report on the Cost of Motor Insurance was published in January 2017. The Report makes 33 recommendations with 71 associated actions to be carried out in agreed timeframes, set out within an Action Plan. The Working Group continued its work throughout 2017 and subsequently published the Report on the Cost of Employer and Public Liability Insurance in January 2018. In both of these Reports the factors as to why insurance costs have increased has been set out, however no evidence was presented that insurance companies were deliberately exaggerating the size of pay-outs in order to increase premiums.
It is clear however from the Working Group’s extensive consultations that there is a lack of transparency around the personal injuries claims environment. A similar view was expressed in the Joint Oireachtas Committee report. Consequently, transparency has been one of the key themes of both the Motor and Employer and Public Liability Reports.
In this context therefore an important step forward is the approval by the Government to publish the Central Bank (National Claims Information Database) Bill 2018. The Bill, which is currently being considered by the Houses of the Oireachtas, when enacted, will enable the Central Bank to publish an annual report using data gathered from the insurance industry to increase transparency on the relationship between insurance premiums and related costs, identifying the factors that drive movements in the price of insurance in the State, the number of claims, as well as providing statistical analyses of the costs associated with settling claims, and importantly understanding the settlement channels used. I am hopeful that with the cooperation of all parties in the Houses, it can be approved expeditiously to have the database in place as soon as possible. It should be noted that the initial focus of the database will be on motor insurance.
With regard to the total amounts companies paid out in claims between 2015 and 2018, the Central Bank has very limited data of this type available to it. This is because with the European-wide transition from Solvency I to Solvency II regulatory regime (in place since 1 January 2016), it no longer produces the annual Insurance Statistics publication, known as the ‘Blue Book’. The tables in the Blue Book were extracted from the Solvency I forms which were completed by the industry and were publicly available (in the Companies Registration Office) and, as these are no longer completed, most of the Blue Book tables cannot be continued in the old format. Furthermore, the underlying data in the Blue Book is now valued on the Solvency II, as opposed to the Solvency I, basis and many of the time series have been broken.
That said however the Central Bank provided my officials with the data below for a previous PQ in July 2018 in relation to motor insurance claims for the years 2013 to 2017. This data includes both private and commercial motor insurance, and excludes the costs associated with the settlement of these claims.
|
Calendar year |
Gross paid claims (€m) |
|
2013 |
869 |
|
2014 |
932 |
|
2015 |
921 |
|
2016 |
956 |
|
2017 |
953 |
The Deputy should note that the data reflects the business of insurance undertakings prudentially supervised by the Central Bank of Ireland (6 undertakings) and undertakings operating on a freedom of establishment basis (3 undertakings). It does not however include any data related to insurance undertakings operating in Ireland under freedom to provide services. In addition, these claim amounts do not represent a constant market size and/or share as, for example, the number of vehicles insured by these undertaking will have varied each year. The Central Bank advised at the time that direct comparison of earned premiums to paid claims is not necessarily appropriate, as it is important to also consider the reserves set aside to meet claims that have not yet been settled and/or notified.
