Mr. Conor Faughnan:

Given that AA Ireland is first alphabetically, I will begin. I thank the Chairman and members of the committee for giving us the opportunity to speak at this meeting this morning. My name is Conor Faughnan and I am joined by my colleague Mr. Colm Carey from the Automobile Association, AA Ireland. AA Ireland is over 100 years old. It was originally a motoring organisation and lobbyist for motoring interests, which is something we still do. Indeed, I am on the register of lobbyists and must fill in my return annually. I will have to remember to include this meeting. In addition, the AA has grown into a very large motoring services organisation. We are the largest personal lines insurance intermediary in Ireland providing motor, home, travel and, more recently, life insurance. The AA has more than 120,000 motor insurance customers and deals with a panel of three underwriters to provide them with quality motor policies. The AA occupies a unique position and is very well placed to see differing points of view in the ongoing debate on rising prices.

The rising cost of motor insurance is the single most important issue for the motoring consumer right now according to AA research. We regularly carry out opinion surveys among our membership base, which involves sending out questionnaires with 25 or 30 detailed questions. We typically receive 8,000 to 10,000 completed questionnaires from members of the public and AA customers. We carried out a poll in March of this year, to which 9,000 people responded. We had asked them to rank various issues in order of importance and they ranked motor insurance costs as more important than road safety, fuel costs, taxation and road maintenance.

The AA has been active on this issue for quite some time. In November last year, we published a detailed set of recommendations under five headings. These are summarised in the paper I have submitted to the committee. Since November 2015 when we published that document, there has been disappointingly little progress on these issues.

There has also been a worsening of the competitive position for the provision of insurance in Ireland. This is something that we feared but the situation is actually worse than we had predicted.

The market in Ireland is increasing, with new car sales up 20% as the economy grows. Motor insurance prices are also increasing sharply. This should mean that competitors are attracted into the market but, in fact, insurers are in active retreat from Ireland. The entry of the Qatar Insurance Company which was announced on 31 August is welcome but is against the trend. We do not know the planned extent of that company's participation in the Irish market. Overall, there are very few foreign players looking to enter the market which is a deeply unhealthy indicator and a worsening problem. Furthermore, premium increases have not finished yet. We estimate that prices may rise a further 20% overall over the next two or three quarters unless action is taken.

As well as retreating out of Ireland altogether, insurers are also seeking to narrow their footprint. They are now typically only interested in mainstream risks or what one could call the plain vanilla insurance policy. They are interested in drivers with no penalty points, a standard car, an ordinary profession and a normal driving history. Even these drivers are facing price increases but drivers who fall out of those standard categories can struggle to obtain insurance at all. We have had conversations, for example, with people who have had an insurance claim or who have acquired some penalty points who cannot shop around. They are captive with their existing insurance company and must absorb whatever price increases are sent their way.

There are several reasons we are not seeing foreign competition enter into the market. One is the reputational damage that was caused by the failure of Setanta but a more significant reason is the lack of clear information and data on claims costs. Foreign insurance companies considering entry into the Irish market are at a disadvantage vis-à-visthe insurers already here because our data is so murky and difficult to understand.

What can the Oireachtas do about this? Our submission makes a number of detailed recommendations. I do not propose to read the entire paper now as that would take longer than the allotted five minutes. There are a number of issues that I would like to draw attention to because they are levers that the Oireachtas can pull. The first of these is to update the book of quantum. Members might be familiar with this book, which describes in detail the appropriate level of financial compensation for injuries of a given severity. There are two problems with the Irish book of quantum. The first is that it is hopelessly out of date. It is more than ten years old and is effectively useless as a guideline document for the courts. The other problem is that the courts are not bound to abide by it. There is a touch of chicken and egg operating here because if the document is not terribly useful, it is hard to compel the courts to stick to it.

We are about to see an updated book of quantum which we called for last November and which was supposed to be produced in January. The updated book is due next month and that will make an important difference. However, what is even more important is that the courts, within the confines of the proper separation of powers, are persuaded to adhere to the book of quantum. That is at the heart of the Gordian knot that feeds into escalating legal costs. Individuals with insurance claims go to the Injuries Board and are given an estimate of the value of their claim. Often their solicitor will suggests that they might do better in court and that they should threaten the insurance company with court. The practical effect of this is that 20% of cases are settled by the Injuries Board, for which there is clear data, and 10% of cases end up in court, for which there is some data, but 70% of cases are settled directly by the insurance companies to prevent a court case from happening and we cannot see what is going on there. The data on out-of-court settlements is not published. This means that insurers are hiding 70% of claims information under their skirts, so to speak. Insurance companies are reporting an increase in claims and I believe that is true. They are also reporting that claims costs are going up and I am also inclined to believe that is true but we are not seeing the proof of that. The key to unblocking this is a proper book of quantum to which the courts adhere. That will remove the incentive for the solicitor to whisper in a plaintiff's ear and for them both to try to squeeze the insurance company.

Another action that the Oireachtas could take is to introduce automatic number plate recognition, ANPR, which involves a camera in a Garda car or elsewhere reading a registration number which is then checked against a database. This is a mature and well-used technology which operates in Great Britain and in many other countries. In essence, it is one of the key ways to reduce fraud. At the moment, we are still using a paper windscreen disk to determine whether a car is insured. That actually facilitates rather than prevents fraud. The only equipment available to gardaí to check whether a car is insured is a torch to shine on the disk. That is worse than useless. We know, on foot of rising premiums, that uninsured driving is on the increase and that will continue because we are not giving the gardaí the resources they need. It is an unfortunate irony that gardaí already have this equipment. It has been physically installed in around 80% of the cars in the traffic corps. There are other cameras out there that can read registration plates, for example, the cameras on the M50. What is missing is the underlying database of insurance information and that is something that the insurance industry can be compelled to put in place. We already have a database of cars that are taxed so, in the first instance, we should get rid of the tax disk and use technology to track that. If a garda finds an untaxed car, I am willing to bet that he or she has also found an uninsured car. Giving those tools to the gardaí would help a lot.

Members of this committee will probably be aware of the somewhat technical issue of the discount rate which does not lend itself to a simplistic explanation. Broadly speaking, it is an assumed rate of return on a lump of money. If an insurance company has to pay me for a catastrophic injury and the payout is estimated to be €10 million, for example, the insurance company can pay me in tranches and there is an assumption made about how much interest or return that €10 million would make. This has a huge impact on the industry because since around 2002, a court precedent set that discount rate at 3%. That was fine and everyone was working off an assumption that the discount rate was 3%. However, a recent court case in 2014, the Gill Russell case reset that discount rate to 1%. While that does not sound like much, for an insurance company that makes a huge difference to how much it must pay out in a lump sum in the case of a claim for catastrophic injury. The insurance companies collectively looked all across their book, at the 2 million motorists they have on cover, and said the discount rate is not 3% anymore but is now 1% so we have to recalibrate all of our reserves. That is part of what is pushing through into premiums but it can be fixed directly. The Minister for Justice and Equality has the power under the Civil Liability and Courts Act to strike a discount rate or to simply state what it should be. The Minister has not done so. We have engaged with the Tánaiste and Minister for Justice and Equality on this matter and brought it directly to her attention. At the moment, because she has not struck a discount rate, the insurance industry collectively has to assume that it follows the court precedent set recently. They must, of necessity, reserve prudently as a result and that is one of the factors that is feeding directly into the increase in premiums that we are paying at the moment.

Our paper makes some other recommendations and I look forward to having a question and answer conversation with committee members. Rather than read out the entire paper, it would be more constructive to leave it there, although there is one more point I would like to make. We deal with insurance companies extensively and we know their DNA. We do commercial deals with them all of the time. One source of frustration for us is that the insurance industry collectively does not share data. An integrated insurance data system is essentially a data hub. If I want to move from one insurance company to another, I do not have to get a letter from the first insurance company and give it to the second one. Companies can look at a data hub, see who I am, my claims history, my penalty points status and so forth. That, in and of itself, should be in place. It is in place in Great Britain and in Northern Ireland, for example. The same insurance companies that operate north and south of the Border have done it in Northern Ireland but not in the Republic because they argue that it is complicated and that they have data protection concerns. This is very frustrating for us. That database needs to be complete and open to brokers and all actors in the insurance market. The Oireachtas could help by compelling insurers to do this.

As I said, there are a few other bits and pieces in our paper, much of which will be self-evident to members. An obvious issue is Garda resources. The Garda traffic corps has been reduced. Every motor insurance claim begins with an accident but if Garda resources are increased, accidents will be reduced. That is clearly an important measure that does not require much explanation.

My parting shot before I finish relates to Setanta insurance which is leading to uncertainty in the insurance market. We have spoken to insurers who want to come into Ireland.

One of the reasons they will not is that they do not know what their liability is going to be because of the Setanta case. If it is the case that for an insurance company to trade in Ireland part of what it must do is essentially guarantee its competitors against their failures, then this is a real barrier for insurance companies. We spoke to an insurer outside Ireland. Only last week one of my colleagues had a detailed conversation with a representative of the firm. He said the firm was willing to trade here but that the Setanta judgment was one of the things preventing it from supplying in Ireland. That is something that has to be fixed.

Thank you for your patience, Chairman. I hope I have not gone over time. I look forward to the conversation.