Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

I thank the committee for the invitation to discuss the issue of the rising costs of motor insurance. Dealing with this issue is important and I welcome the initiative of this Oireachtas committee to hold public meetings over the coming weeks. I agree with the committee that this area requires urgent attention. I look forward to hearing what all the stakeholders attending the committee hearings have to contribute and to what the committee members have to add.

I will update the committee today on my work in the Department of Finance with the cost of insurance working group which brings together all the relevant Departments and offices involved with the process. The committee can rest assured that I will incorporate the outcome of the committee hearings into the analysis of the cost of insurance working group.

The cost of insurance working group was established in July and has representation from the Departments of Finance, Jobs, Enterprise and Innovation, Justice and Equality, and Transport, Tourism and Sport, the Central Bank of Ireland and the Personal Injury Assessment Board. The objective of the working group, as set out in our agreed terms of reference, is to identify and examine the drivers of the cost of insurance, with particular focus on motor insurance, and to recommend short, medium and longer term measures to address the issue of increasing insurance costs, taking account of the requirement for an economically vibrant and financially stable insurance sector.

The core areas to be examined by the working group in this first phase are the motor insurance sector generally, at present and in recent years; the effects of legal costs and litigation processes on insurance costs; the current claims compensation arrangements and the cost of claims; insurance data and information; the impact of accident rates; the impact of unlawful activity on the insurance sector; and other market issues.

Given that the issue of the cost of insurance is complex and in order to get to the heart of these issues as soon as possible, I established four subgroups to review them in detail. Chairs have been appointed to these subgroups and work has already commenced. The outputs of these subgroups will feed into the regular meetings of the working group. I am determined to ensure that this important work progresses at a pace, meeting deadlines and achieving results. I am taking a hands-on approach as chair, working closely with Department of Finance officials and liaising closely with the four subgroups that are now established. I have also personally met a number of stakeholders to help me develop a greater understanding of their perspective on this complex issue.

The working group has held two meetings to date, on 20 July and 1 September. We have scheduled meetings for every two to three weeks to the end of 2016. By the end of October, I want to have identified the priority actions required and this will form the basis for an update report to the Minister for Finance. From November to December, my aim is to put in place an action plan to enable the relevant Departments and offices to commence the implementation of these priority actions. In this regard, I will be consulting regularly with my Government colleagues.

A number of specific issues are reported to be contributing to the increasing cost of car insurance in Ireland. Industry, for example, argues that excessive award levels, increased number of claims, and excessive legal costs are significant contributory factors. However, because of a lack of transparency in the final settlements, it is difficult to corroborate these industry arguments. All one can definitely say is that motor insurance costs have increased significantly in the year to July 2016.

In developing solutions, we have to be conscious of the need for a stable insurance sector and ensure that risks to policyholders and the wider financial system are minimised. Consequently, the importance of insurance companies meeting regulatory requirements and maintaining adequate reserves cannot be understated in examining the pricing of insurance products.

I believe we need to build consensus around the causes of the problem and to identify appropriate actions which then need to be implemented as soon as possible in order to restore some stability to the motor insurance market, as well as hopefully making it more attractive for new entrants. It is likely that some of our actions may take time to implement, particularly if legislation is required, but with the co-operation of all political parties, these measures can be prioritised.

As mentioned earlier, one of the major shortcomings with existing settlement arrangements is the lack of transparency around the cost of settling claims or awards in personal injuries cases that do not go through the courts or the injuries board. There is an absence of information from the industry on the number of personal injury claims settled, average injury settlement amount, average fees and average time taken to settle.

This is crucial information if we want to get to the root cause of the problem of increasing insurance costs. This will be a key issue for the working group to address. Ultimately, such information is important if we wish to try to ensure consistency of awards, whether they be made by the industry, the Personal Injuries Assessment Board, PIAB, or the courts.

In addition to ensuring access to data on the insurance claims, the cost of insurance working group will carry out analysis of the personal injury claims environment and the various claims resolution channels such as through the PIAB, the insurance industry and the courts. It will examine the effects of legal costs and litigation processes on insurance costs and will review how improvements in these areas in other jurisdictions have influenced the cost of insurance on the ground. A number of additional issues have been raised that can contribute to access to insurance at a reasonable cost. They span the work of several Departments and offices and will be addressed by the working group. These include the lack of a link between the national car test and the availability of insurance, insurance costs for the young and those over 65, the case for rural dwellers with no public transport to have car insurance at a reasonable cost, the issue of returning emigrants having difficulty obtaining car insurance and the cost of insurance to taxi drivers, hackneys and hauliers. The joint review of the motor insurance compensation framework was carried out by the Departments of Finance and Transport, Tourism and Sport during the first half of 2016. The Departments are now working to implement these recommendations. The report includes a recommendation for additional data to be provided by insurers to the Minister for Transport, Tourism and Sport. This recommendation, when implemented, has the potential to result in significant annual savings to the Motor Insurers Bureau of Ireland, as it should provide for a more robust enforcement of penalties by An Garda Síochána in respect of uninsured driving.

In conclusion, I am keen to come up with credible solutions to address the problem of the increasing costs of motor insurance with a view to implementing them as soon as possible. The Government and other actors are not coming at this from a standing start. Discussions on legislative changes to support the PIAB already are under way and members will hear directly from the Injuries Board regarding changes to the new book of quantum, for example. Measures to tackle fraud are in the pipeline and the industry and other interested parties already have brought potentially worthy actions to the table. It must be remembered, however, that the ability of the Government to influence insurance pricing is limited, as insurance companies are required by European law to price in accordance with risk. The provision of insurance cover and the price at which it is offered is thus a commercial matter based on an assessment of these risks. While the Government cannot direct insurance companies on pricing of insurance products, with members' help it can identify measures that may, in the short, medium and longer term, lead to a better operating environment and a reduction in claims costs. The working group which I chair will do all it can to identify such measures and to recommend changes to reduce costs. I will be happy to accept whatever assistance the joint committee can provide in helping this objective to be achieved. I am happy to now take any questions or provide clarifications to assist the committee.