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

I thank the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach for this second invitation to discuss the emerging recommendations of the cost of insurance working group. I would like to update the committee today on the work I have been doing 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. In September when I last appeared at this committee, I welcomed the initiative of the Oireachtas committee to hold public meetings in order to produce its own report on this urgent matter. I am, therefore, pleased to see that the committee has published its report with its own set of recommendations, many of which complement the emerging recommendations published by the Department of Finance.

Both strands of this work are hugely important. The Irish insurance sector has been subject to a lot of volatility in recent years, as the committee will know.

When one looks at the inflation data from October 2016, one will see that insurance prices have increased by 47% since January 2011, motor insurance prices have increased by 51% during the same period and by 8.5% in the 12 months to October 2016. These kinds of increases – these so-called “super-cycle” trends – while down from September, are very damaging to the economy. They hit consumers hard and they undermine competitiveness. The future for insurance in Ireland must have certainty, clarity and transparency at its core.

In that regard, the Minister for Finance, Deputy Noonan, set up a task force to look at the insurance sector earlier this year. I was asked to chair a working group under this task force to examine the various factors contributing to the increasing cost of insurance. The cost of insurance working group was established in July. It brings together the relevant stakeholders on the Government side, namely, the Departments of Finance, Transport, Tourism and Sport, Jobs, Enterprise and Innovation and Justice and Equality, as well as the Personal Injuries Assessment Board, the State Claims Agency and the Central Bank. The objective of the working group, as set out in its agreed terms of reference, is to identify and examine the drivers of the cost of non-life 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 being 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.

As the issue of the cost of insurance is complex and multilayered, I decided as a starting point to establish four subgroups to examine particular issues in detail. These issues were understanding the motor insurance market, improved data availability, the cost of claims and other public policy issues. Chairs were appointed to these subgroups, which have been meeting on a weekly basis since September. The outputs of these subgroups are currently feeding into the regular meetings of the working group. The working group has held ten meetings to date and will continue to meet every two weeks to the end of 2016.

The consultation process is ongoing and to date, the working group and the four subgroups have met with representatives from AA Ireland, Auto Records Limited, the Consumers Association of Ireland, the Freight Transport Association of Ireland, the Irish Brokers Association, the Car Rental Council of Ireland, the Irish Road Haulage Association, Insurance Ireland, the Law Society of Ireland, the Motor Insurers Bureau of Ireland, Tiománaí Tacsaí na hÉireann, and the chief executive officers from AIG, AXA, Aviva, FBD, Liberty Insurance and RSA Insurance. In addition, submissions received from all interested parties are being considered as part of the process. I have also personally met a number of stakeholders to help me develop a greater understanding of their perspective on this complex issue. In that regard, I have had informal meetings with representatives from a number of key stakeholders including: Insurance Ireland, AA Ireland, the Injuries Board, the Irish Brokers Association, IBEC, FBD, the Bar Council of Ireland, and the Central Bank of Ireland.

Undoubtedly there are a number of specific issues contributing to the increasing cost of car insurance in Ireland and because of this, I believe it is generally recognised that there is no quick-fix solution to this problem. In addition, in considering solutions the group has been very conscious of the need to ensure the maintenance of a stable financially solvent insurance sector to 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. Moreover the constraints imposed by Solvency II on the State’s ability to influence insurance pricing must be factored into the overall approach to satisfactorily resolve this issue.

A key part of the work of the group has been to try to build consensus on appropriate actions, which then need to be implemented as soon as possible to restore some stability to pricing in the motor insurance market. Another important aspect of our work is to make Ireland more attractive for new entrants. It is likely that some of our actions may take time to implement, particularly if legislation is required.

In order to progress this agenda, however, political consensus among the different parties and Members in the Oireachtas is essential. Consequently, for this reason I welcome and am appreciative of the work of this committee in conducting public hearings on this matter and in producing a report.

At the end of October, I provided the Minister for Finance with emerging recommendations. The emerging recommendations touch broadly upon nine areas and between high level and lower level contain about 40 actions. One area relates to consumer protection. It seems clear to me that we need better and more proactive information on the part of insurance companies when quoting for insurance or renewing insurance, including providing more information on how a person’s premium has been calculated and the reasons behind changes year on year and so forth. Other issues, such as providing greater recognition of previous driving experience outside the State for returning emigrants, are also the subject of a recommendation. In summary there is a host of well-documented consumer issues to which the emerging recommendations speak. I believe this committee's report has identified similar issues, as well as solutions.

A key area where change is required is in the claims environment. We need to enhance transparency and facilitate the use of data sharing and collection that we see in other jurisdictions. A resource, either in the form of a claims database or a claims register, is needed for the sector so that among other things, we can see what claims are being made against property or for personal injuries, the legal and other costs that are being incurred and the channel of resolution and what impact that has on the final settlement. This happens elsewhere and it should happen here. It is my view that greater transparency in the claims environment should lead to greater stability in the pricing of motor insurance and should help prevent these “super cycles” both up and down that have occurred regularly in the Irish market in the past. I note the emphasis the Chairman also place on transparency in his preface where he states “This Committee, above all, requests the publication of 'raw' insurance data and that transparency becomes the norm within the insurance sector ... from this day forward.”

Significant concerns have been raised around the uncertainty of the claims process, its cost and the method for making awards for personal injuries. I am fully respectful of the right of Judiciary to set awards but I have heard concerns expressed on the need for more consistency in the setting of those awards. Again, I note this is an issue on which this committee's report has a particular focus.

The working group is therefore going to make a recommendation to establish a personal injuries commission to look at those areas that speak directly to the cost of personal injuries. Subject to Government approval, I hope this commission can be up and running as soon as possible and will work alongside the ongoing reform of the book of quantum and the Personal Injuries Assessment Board. Its terms of reference have yet to be finalised but we have already scoped out the priority areas for it to look at. These include conducting an exercise to look at the average awards in other jurisdictions, as well as the grading of personal injuries. I hope this committee can be broadly supportive of this proposal, as I believe it covers some of the areas highlighted in its report. If, from their engagement with the industry and others, members of the committee or the Chairman believe they can identify a person or persons to nominate to this commission, such a proposal would be very welcome.

Two other important areas that need to be tackled are uninsured driving and fraud. In regard to uninsured driving, the working group is likely to recommend that a fully functioning insurance database to allow An Garda Síochána to check insurance compliance through the use of technology such as automatic number plate recognition be finalised. Much work has already been done in this area, however, I would like to see the roll-out of such a database to be expedited.

On the fraud issue, we are exploring what can be done to improve data sharing around suspected fraud, through the possible establishment of a fraud database. The legal requirements of such a database such as, for instance, data protection issues are being examined by the working group and any recommendations must be conscious of them. I note this committee's recommendation in this area that fraudulent and exaggerated claims should be pursued and tackled more aggressively by the Office of the Director of Public Prosecutions and insurance companies and I have no issue with it. Other recommendations that are emerging include giving consideration to reviewing relevant legislative provisions in the Civil Liability and Courts Act 2004, as well as Road Traffic Act 2004. The group is also looking at some sector-specific issues in light of concerns raised by hauliers and taxi drivers.

Since providing these emerging recommendations to the Minster for Finance, the working group is working to finalise the report and developing an action plan to enable the relevant Departments and offices to commence the implementation of agreed priority actions. The report and action plan will detail any legislative or regulatory changes that may be required and will include a detailed timeline for implementation. I am determined to ensure that this important work progresses at a pace and that it meets its implementation deadlines. I am taking a hands-on approach as chairman, working closely with Department of Finance officials and liaising closely with the four subgroups that are now established. Our plan is to publish a report in December of this year.

In conclusion, our work is about taking action on credible solutions to address the problem of the increasing costs of motor insurance with a view to implementing them as soon as possible. While we cannot direct insurance companies on pricing of insurance products, I hope these recommendations will settle the current uncertainty we are seeing around premium prices. As these recommendations work their way through, I believe we will then see a sustainable reduction to more appropriate insurance premium prices. We can achieve that for the customer, while also protecting the stability of the insurance market and ensuring it is a market worth being in. I have asked my officials to review the recommendations of the Joint Committee on Finance, Public Expenditure and Reform and Taoiseach with a view to incorporating aspects that complement the analysis of the cost of insurance working group.