Thursday, 26 September 2019

Ceisteanna (69)

Bernard Durkan


69. Deputy Bernard J. Durkan asked the Minister for Finance if reference can be made to comparisons with other jurisdictions in Europe in respect of insurance costs here with a view to ensuring the competitiveness of the economy; and if he will make a statement on the matter. [39168/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

The Irish insurance sector is diverse, comprising life, non-life and reinsurance firms providing a range of products and operating across a number of geographical markets. As Minister for Finance, I am responsible for the development of the legal framework governing financial regulation of the sector. This framework is mainly governed by the EU Solvency II Directive, which provides for three ways in which an insurance undertaking can operate within the Irish market.

These are to:

- establish a head office in Ireland (authorised by Central Bank of Ireland);

- establish a branch in Ireland through Freedom of Establishment (FOE); or

- operate on a Freedom of Services basis (FOS), i.e. conduct business in Ireland from another country.

It should be noted that there are companies operating in each of these channels in the Irish insurance market. The Solvency II framework is designed to allow for a level playing field across the European Union for insurers, not only in terms of access to markets within the EU, but also with regard to the level of supervision and regulation. Therefore, it plays an essential role in facilitating competition in the insurance sector across the EU. It also expressly prohibits Member States from adopting rules which require insurance companies to obtain prior approval of the pricing or terms and conditions of insurance products.

With regard to comparing insurance costs across jurisdictions in Europe, Insurance Europe, the European (re)insurance federation, produces reports on an on-going basis regarding the insurance industry across Europe. For example, the European Insurance in Figures (2017 data) and the European Motor Insurance Markets, both published in early 2019, contain some useful comparative information in respect of insurance up to 2017. The European Insurance — Key Facts published in October 2018, graphs the average premium level across European countries for a variety of insurance products for the year 2017. The varying levels of premiums across Europe is accounted for by a wide range of regulatory, risk and economic factors which differ across European jurisdictions (as noted on p. 16 of the European Motor Insurance Markets).

For example, other factors that may influence an insurance company’s decision to operate or not in a particular country, could include the number of personal injury claims made, the level of awards granted, and the legal costs and time associated with settling/defending claims in that country. In this regard, there has been some sectors of our economy such as the leisure, adventure and hospitality sectors where insurance cover has either become unavailable or prohibitively expensive. Indeed, I understand that in recent meetings between Minister of State for Financial Services and Insurance, Michael D’Arcy TD, and a number of UK insurers/underwriters in London who have recently left the Irish insurance market, the reasons above were mentioned as to why they had made this decision. Therefore, for these parts of the market, there is undoubtedly an issue around its attractiveness and this consequently has impacted on competitiveness.

Consequently, in order to create a more competitive environment, the Government is focussing on implementing the recommendations of the Cost of Insurance Working Group (CIWG) including those of the second Personal Injuries Commission (PIC) Report which concluded that soft tissue injuries are significantly higher here than in England and Wales (4.4 times) and recommended that action be taken to address this disparity through the establishment of the Judicial Council. The recently enacted Judicial Council Act 2019 provides for the establishment of this Council, which will allow for the recalibration, by the Judiciary, of award levels for personal injuries. It is now a matter for the Judiciary to establish the Judicial Council and the subsequent Personal Injuries Guidelines Committee. While the Government cannot interfere in their deliberations due to the constitutional separation of powers, it is my hope that the Judiciary will recognise the importance of this issue and will prioritise it accordingly by completing a first set of guidelines, which take account of the PIC’s benchmarking report, as soon as possible. At the same time, the Law Reform Commission (LRC) has begun a detailed analysis of the possibility of developing constitutionally sound legislation to delimit or cap the amounts of damages, which a court may award in respect of some or all categories of personal injuries, as part of its Fifth Programme of Law Reform.

I believe that the creation and implementation of the Personal Injuries guidelines by the Judiciary will result in the lowering of award levels. As importantly, I believe it should lead to a greater consistency in award levels for injuries of the same type. This therefore should mean that there will be less of an incentive for a person to litigate, as they should not be getting any more from a court award than a PIAB award, which in turn should have a significant impact on legal costs. In summary, I believe that over time the clearest signal that these changes are working is when there is an increase in the number of PIAB cases being accepted by claimants particularly for minor and moderate injuries. In addition, I believe that the cumulative effects of the completion of the CIWG recommendations will include greater stability in the pricing of insurance for consumers and businesses and a more competitive insurance market overall.