Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

I welcome the opportunity to provide an update on the work of the cost of insurance working group to the committee. My primary focus in this address will be on business insurance. I am very conscious of the difficulties that the cost and availability of insurance are creating for many businesses and voluntary and community groups. I can understand the frustration that many people have with the existing position. I believe that, with the objective evidence provided by the Personal Injuries Commission benchmarking report on the higher than average award levels for soft tissue injuries in the country, we have a solid basis for addressing these difficulties through the enactment of the Judicial Council Bill. I will talk about that in more detail later.

The cost of insurance working group has made it clear from the outset that there is no single policy or legislative silver bullet to stem or reverse immediately premium price rises and that some of the necessary reforms will take time to implement. This was also recognised by this committee in its motor insurance report. The major constraints faced by any Government are twofold. Award levels are the prerogative of the courts and therefore, for constitutional reasons, the Judiciary cannot be directed as to the levels that should be applied. Second, pricing levels are a commercial matter for insurance companies and are determined based on the risks that they are willing to accept. For legal reasons, the Government cannot interfere in such matters as this is prohibited by the EU Solvency II directive. It was recognised that there was much the Government could do to improve the general environment within which insurers operate as well as laying the ground for a more long-term transformation of the insurance market through tackling issues such as award levels. This is the context within which the work of the cost of insurance working group needs to be considered.

There has been significant progress in the implementation of the two cost of insurance working group reports. Examples include addressing the personal injuries framework in Ireland through the establishment of the Personal Injuries Commission, and its subsequent two reports, the second of which benchmarked award levels for soft tissue injuries and made recommendations to address gaps that exist between this jurisdiction and others. Another is the commencement by the Law Reform Commission of the examination of the possibility of capping awards in respect of some or all categories of personal injuries through legislation. Insurance fraud is being tackled through closer co-operation between An Garda Síochána and the insurance industry on foot of the fraud round table's work and the recent decision by the Garda Commissioner to develop a divisional focus on insurance fraud, which will be guided by the Garda National Economic Crime Bureau, GNECB, which will also train gardaí throughout the country on investigating insurance fraud, as well as the recent success under Operation Coatee, which targets insurance related criminality.

The Government has made several legislative changes which are significant in the insurance reform debate and called for by stakeholders. These include increasing transparency around the cost of private motor insurance through the establishment of the national claims information database, NCID, in the Central Bank as well as the Courts Service confirming that it will publish a more detailed breakdown of awards in personal injury cases in its annual reports; increasing the effectiveness of the Personal Injuries Assessment Board through the Personal Injuries Assessment Board (Amendment) Act 2019; making it easier for businesses and insurers to challenge cases where fraud or exaggeration is suspected through amendments to sections 8 and 14 of the Civil Liability and Courts Act 2004; and providing certainty to policyholders and insurers through the reform of the insurance compensation fund.

The committee should note that I look forward to the finalisation of the work of the Central Statistics Office, CSO, on a price index for business insurance as well as the Central Bank's work potentially to extend the scope of the NCID to include employer and public liability insurance, which at this point I believe it should. I will also look at how we can speed up the work related to the development of a functioning fraud database, recognising that data protection concerns must be addressed before other issues such as the governance or location of such a database can be decided. I believe that the cost of insurance working group actions taken to date have helped to create a much more receptive atmosphere for what we are trying to achieve with the reform of the area of insurance and personal injuries litigation, since there is a much greater understanding of the depth, nature and extent of the underlying problems and much greater support for what needs to be done to address them.

I believe that these actions have had a significant impact on private motor insurance. CSO figures from May 2019, which is a small change from the script circulated, which indicated April, show that the price of motor insurance is now 24.5%, rather than 24.4%, lower than the July 2016 peak, almost three years ago. My colleagues in Government and I are determined to continue working to ensure that these positive pricing trends can be extended to other forms of insurance, including those relevant to businesses.

I will address the issue which I believe is key in the next phase of work of the cost of insurance working group. Bringing the levels of personal injury damages awarded in this country more in line with those awarded in other jurisdictions is the single most essential challenge which must be overcome if there is to be a sustainable reduction in insurance costs. The Personal Injuries Commission has highlighted the significant differential between award levels in this country and England and Wales in particular, and has made a number of recommendations to address the issue, including the establishment of a judicial council to compile guidelines for appropriate general damages for various types of personal injury.

I believe that this awards gap needs to be closed significantly and I am working with the Minister for Justice and Equality, Deputy Flanagan, to ensure that this happens at the earliest opportunity through the enactment of the Judicial Council Bill, which completed Committee Stage in the Seanad in April. Since then, the Government has approved the drafting of amendments for Report Stage in the Seanad, which will provide for the establishment of a personal injuries guidelines committee, the sole purpose of which will be to develop guidelines for various types of personal injury to be adopted by the judicial council. The amendments are subject to formal legal drafting by our colleagues in the Office of the Parliamentary Counsel and I hope that they will be agreed on Report Stage in the Seanad shortly. I have been informed that the Seanad will take this next Thursday. The co-operation of all Members of the Oireachtas will be vital in getting the Bill enacted as soon as possible. I know that I can count already on support from members of this committee.

It is to be hoped that this, along with the work that the Law Reform Commission has commenced, will result in the lowering of award levels. If this were to happen, I would expect the insurance industry to take account of such reductions in its pricing. Mr. Justice Nicholas Kearns, former President of the High Court and the chairperson of the Personal Injuries Commission, noted in the foreword of the commission's second report that insurance industry representatives on the Personal Injuries Commission repeatedly stated that because award levels and associated costs accounted for the bulk of the cost of insurance, if claims costs were to come down and to be maintained at a consistent and predictable level, then premiums would also reduce accordingly.

I want to address the establishment of a dedicated Garda insurance fraud unit. It is important to clarify that the recommendation from the cost of insurance working group was to explore the potential for further co-operation between the insurance sector and An Garda Síochána with regard to insurance fraud investigation. While the issue, including the UK precedent, was explored in the report and the potential benefits were outlined, no commitment was given on this matter. It was made clear that it was always subject to further examination and that any decision on this matter was always going to be for the Garda Commissioner. Since my previous appearance before the committee last year, the Garda Commissioner has decided for operational reasons that a divisional focus is preferable to the establishment of a centralised insurance investigation unit. I understand that this approach is aligned with a general divisional focused Garda model. The Commissioner intends that the GNECB will guide divisions and provide training in the investigation of insurance fraud. It is important to accept the expert view of the Garda Commissioner in this regard, and I am confident that this marks a key turning point in how insurance fraud will be investigated by An Garda Síochána in the future.

Aside from what we as a Government or the Oireachtas can achieve, I will address the legal profession and the insurance sector itself, which also have to play an important role in addressing the issues that some businesses are experiencing. I have spoken in the Dáil previously about the frustrations that exist among businesses and other groups regarding these two sectors. In that respect, I met the Law Society and the Bar Council of Ireland and set out to both my belief that it was vital that they continued to give their public support and commitment to the Personal Injuries Commission's recommendations.

I accept the commitments which both have since made. On the insurance side, I have put it to the industry that it needs to provide strong public commitments very soon to reflect savings to be gained from the recalibration of award levels. In addition, it will be important for it to widen its risk horizons and to re-enter segments of the market from which it has previously exited as a sign of good faith that the claims environment should begin to stabilise once the Judicial Council Bill has been enacted.

In the end, the availability and cost of insurance to some businesses will depend on the consistency and quantum of award levels. The cost of insurance working group structure remains the best means by which to continue to achieve this objective. The enactment of the Judicial Council Bill will also be an important step forward in this regard and I hope there will be support in the Houses to enable a speedy conclusion to this process. In this spirit, I intend to work closely with Deputies Michael McGrath and Pearse Doherty on considering how to progress their respective insurance related Private Members' Bills, the Civil Liability and Courts (Amendment) Bill 2019 and the Consumer Insurance Contracts Bill 2017. Along with the cumulative effects of the completed implementation of the two reports’ recommendations, this work will include views on increasing stability in the pricing of insurance for businesses and developing a more competitive insurance market overall.