18/12/2015

FF Calls For Action On 'Soaring' Motor Insurance Costs

Fianna Fáil has criticised the Tánaiste Joan Burton for her respond to a motion aimed at tackling "soaring" motor insurance costs.

Finance spokesperson Michael McGrath said that her response was "totally inadequate".

He was speaking following exchanges at Leaders' Questions in the Dáil today when Joan Burton repeatedly failed to take the opportunity to commit to taking practical action to reverse the trend in premiums.

Deputy McGrath said that motor insurance is the fastest rising item in the CSO basket of goods, having risen by 30% since last year with insurers warning of further increases of up to 25 per cent in 2016.

"Motorists are absolutely reeling from these increases in insurance premiums. By the end of next year, the cost of insuring an average size family car is likely to have gone up in the region of €300. This is a massive hit to disposable income," Deputy McGrath said.

"It is my view that, unless action is taken, further steep rises in motor insurance premiums are certain. There are a number of very worrying trends across the industry. The Central Bank has recently reported an average increase of 8.3% in private motor claims frequency and an increase of 8% in the average cost of a claim from 2013 to 2014. The time taken to settle motor insurance claims is now rising and there is considerable variation in reserving practice across motor insurance providers.

"Up to 2013 we were in a period of falling motor insurance premiums. However the benefits that were achieved from concerted action to reduce costs are now evaporating. This is resulting in a huge squeeze on family finances and putting businesses under increased cost pressure. "Unfortunately, the situation has been met with indifference from the Government with the Minister for Finance seemingly only concerned with solvency issues relating to insurance firms. It appears no one in government is concerned with the interests of consumers and businesses when it comes to motor insurance premiums.

"I am reiterating my call for the establishment of a task force similar to the Motor Insurance Advisory Board (MIAB) in 1998 whose recommendations successfully achieve a fall in insurance costs of 40 per cent in real terms between 2002 and 2013. The forum should bring together representatives of the industry, consumer advocates, the Garda Transport division and the regulator to bring forward practical proposals to reverse this very worrying trend.

"We cannot rely simply on assertions from insurance companies to justify increases. I am setting out a number of measures that I believe would have a positive influence on insurance premiums."

These include:

• Full transparency on profitability of industry: Motor insurers should be required to publish greater levels of information regarding their financial strength, credit rating and profitability relative to premium income. This would allow an assessment of the validity of industry claim that premiums are rising because personal injury awards are up to 3 times higher in Ireland than the UK. Many commentators suspect that the real reason for price hikes is a complete lack of transparency as regards the true profitability of insurance firms and a desire on the part of insurers to sneak in price rises on the back of requirements to hold greater reserves under EU rules.

• Settlement of claims: Greater transparency is also needed regarding the cost of settling claims or awards in personal injuries cases that do not go through the courts or the Personal Injuries Assessment Board.

• Improved regulation model: The Central Bank of Ireland should be in a position to deny an insurance firm permission to operate in the Irish market if it believes that it is registering in another jurisdiction solely for purposes of availing of a more lenient regulatory regime. Unsustainable price competition is not in anyone's interest and ultimately leads to a weaker overall market.

• Tougher road safety measures: A number of high profile recent cases have undermined public confidence in the application of road safety measure particularly in relation to drink driving laws. The law must be made as water tight as possible to prevent the use of technicalities to avoid conviction. It must also be rigorously implemented.

• Action on exaggerated claims: Those sections of the Civil Liability & Courts Act 2004 which were never progressed to deal with exaggerated claims should now be implemented.

• Consistency in Court awards: The monetary limits of the courts were increased in February 2014 with the maximum for the Circuit Court increased to €60,000 for personal injuries. Greater on the job training is required for members of the judiciary to ensure that comparable cases are treated in a similar manner.

• Clear distinction between MIBI and ICF: The Motor Insurance Bureau of Ireland (MIBI) is a fund to deal with the claims by victims of uninsured / unidentified drivers. The Insurance Compensation Fund (ICF) is funded pay a 2% levy on all non-life assurance policies to cover claims where an insurance company collapses. In the case of Setanta Insurance, the failure to have clearly established rules as to which entity is liable has led to ongoing delays in meeting claims. This needs to be resolved by legislation in order to protect consumer interests.

(MH)

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