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Insurance Costs

Dáil Éireann Debate, Tuesday - 29 January 2019

Tuesday, 29 January 2019

Ceisteanna (160)

Michael Healy-Rae

Ceist:

160. Deputy Michael Healy-Rae asked the Minister for Finance if alternative avenues will be examined to help reduce the cost of insurance here (details supplied); and if he will make a statement on the matter. [3800/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

With regard to the examination of alternative motor insurance systems, such as that in use in New Zealand as referenced in the details supplied, I would refer the Deputy to the Cost of Insurance Working Group’s 2017 Report on the Cost of Motor Insurance, and in particular Chapter 7.5 and Appendix 7 of that report, which deal with international comparisons.

The report notes the use in some countries - including New Zealand and parts of Australia and Canada – of what is known as a "no-fault" system, where the State pays compensation or the cost of rehabilitation and the public pays for this system through taxes. The report states that some of these models are quite complex and should to be considered in a wider context. As well as impacting upon insurance premiums, they may impact on taxation and social security and must be considered in terms of existing constitutional, national and European requirements, e.g. the requirements of EU Motor Insurance Directives in terms of an individual’s right to monetary compensation.

The Motor Report recommended that a Personal Injuries Commission, PIC, be established with a view to proposing further measures that can help reduce the cost of claims. Among other issues, the PIC was charged with analysing and reporting on alternative compensation and resolution models internationally, focusing on common law systems while taking account of social welfare, health care and related factors associated with each jurisdiction.

The second report of the PIC, under the chairmanship of former President of the High Court Justice Nicholas Kearns, was published in September 2018, and Chapter 3 includes the results of its examination of the various compensation and resolution models used in around a dozen different countries, including, in section 3.5, New Zealand. The report is available at: https://dbei.gov.ie/en/Publications/Publication-files/Second-and-Final-Report-of-the-Personal-Injuries-Commission.pdf.

The PIC concluded that it would be difficult to envisage a no-fault system such as exists in New Zealand being applied in Ireland in view of our current legal and constitutional framework. The PIC considers that there may be a European-level legislative dimension to this matter, with such models only operating in jurisdictions outside the continent. The PIC also notes that introducing a no-fault system model would have fundamental cost implications in terms of raising revenue in the form of direct and indirect taxation.

At a broader level, I would be cautious about the introduction of a State-backed insurance scheme in this jurisdiction generally for a number of other reasons. Such an approach could actually decrease competition in the Irish insurance market, with insurers potentially deciding to cease insuring certain types of risks if there is a view that the State will insure these risks instead, particularly lines of business which are considered to be unprofitable. This would lead to a lack of choice for those seeking cover, which could ultimately mean that the cost of insurance becomes even more expensive than it is now. Also, there is no reason to believe that the State would be any better at managing risks than private insurance companies, and as a result there potentially would be a large financial exposure to the State if significant losses were incurred. Finally, any State insurance scheme would be required to comply with the same prudential rules as private companies, thereby meaning that the cost of any insurance would still have to reflect the risk involved.

In view of these factors, I am not convinced that a State-backed motor insurance scheme would be a panacea with regard to the cost or availability of insurance, either for younger drivers or other categories of consumers.

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