Richard Bruton (Dublin Bay North, Fine Gael) | Oireachtas source

I welcome this debate. In many ways this Dáil is unique and will be tested by its ability to take on issues like this and to shape better thinking on how to tackle it. We are, rightly, setting new ambitions for ourselves and planning to work in different ways. It is also important to remember that economics have not gone away, to paraphrase another political phrase. At this stage in our economic rebuilding after the crash, we have restored a little less than half the jobs that were lost. That is 142,000 jobs. It is quite an achievement but not quite half of where we need to be. We have seen a healthy economic recovery, with average growth in the economy in the past two years of 6%. That is significant. People need to bear in mind as we grapple with issues in the House that 75% of that new national income has come from investment.

The last ten years have been a lost decade in terms of investment that just did not occur in the economy. It is important, however, to understand the nature of future growth. It is not there for all of us to come up with new claims or demands; it is a process of trying to rebuild investment that was lost. Those of us who work in the public sector know more acutely than most that the lost decade saw a huge impact on our capacity for public investment. Lost investment in that period probably ran at approximately €15 billion, which would have gone into housing, health, education and child care - things that we rightly set as big ambitions.

It is important to recall that Ireland is a small, open trading economy which stands or falls by our ability to create a competitive edge to win in difficult economic markets. The National Competitiveness Council has often talked about the need to create a virtuous circle whereby our ability to provide better living standards, including wages, in the public, private and personal spheres must be matched by our ability to generate new business. We must also create a competitive edge and do things in a smarter way so that we can grow the economy and fulfil our ambitions.

As we start to see momentum in our economy, this is not a time for wage demands that go way beyond productivity, or seeking to profit-take at a time when many families are under severe cost-of-living pressures. In the context of this debate on insurance, we have to keep a sharp eye on things that make an impact on the country's competitiveness or families' ability to make ends meet, which is what underpins competitiveness. Recent years have seen trends, particularly in motor insurance, that are out of kilter with that. We have seen a 60% growth in motor insurance costs over the last four years, for example. We therefore need to examine what is driving such costs and identify the elements we can manage. Motor insurance is extremely important to ordinary families and represents nearly 2% of family expenditure, according to the consumer price index. For families that have a greater dependence on cars, the cost is much more than that. For the business sector the cost is smaller, at approximately 1%, but insurance can be a significant block to progress in certain elements of the commercial environment.

I was not here for the speech by the Minister for Finance, but I read it subsequently. The study that the Minister is undertaking with the support of the Central Bank is absolutely crucial. A lot of anecdotes are thrown around about drivers and costs, and what causes insurance premiums to grow so rapidly. The truth is that it is a combination of many elements, which we need to disentangle. We must identify which elements on the supply chain we can hope to influence and change. For example, the PIAB is a piece of the jigsaw for which my Department is responsible and there are encouraging trends in that area. We are continuing to deal with the same proportion of cases in this non-legalistic fashion, with awards being broadly accepted across the board. The awards by the PIAB have been remarkably stable, with virtually no change since 2007, so it has managed that really well. The PIAB handles around 12,000 claims annually from a total of 34,000. Many of those claims are settled outside the PIAB or the courts. We need more knowledge about what sort of settlements are occurring outside the PIAB, because they are certainly not as stable as what is happening within the PIAB. Rather than relying on anecdotal evidence, let us assemble hard data from the companies. That is an important piece of work that should take place.

There is no doubt that the frequency of claims has grown; they have increased by 21% in the last four years, which is a lot faster than the growth in insurance policies. Therefore, something is driving claims frequency, which we need to understand so that we can manage it more effectively.

The cost of awards has arisen repeatedly in this debate. While the PIAB system is stable, people are clearly looking at court awards. There is some evidence of what is happening there. The number of cases that get to court is relatively stable, but more of them now appear to go to the High Court than the Circuit Court, and that is where awards are high. The value of awards, while fairly stable in the Circuit Court, appears to be growing substantially in the High Court, by 40%. Of course, very different cases are involved, including medical negligence cases. We do not have them sufficiently disentangled. That will be an important piece of work to get a better handle on what is happening in the courts.

My Department is currently updating the book of quantum. While the courts remain independent, they have an obligation to take account of the quantum of damages. We hope to have a new quantum of damages in place in the first half of this year, which will bring greater consistency to court awards. In turn, that will reduce the likelihood that people will either have recourse to the courts or, in making out-of-court settlements, be influenced by a sense that court awards can be very high and almost a lottery if one goes into it. It is important therefore for us to develop that quantum, and work on it is well advanced.

We are also looking at changes to the PIAB legislation which could make the system smoother and provide fewer opportunities for cases to be brought elsewhere. The report by the National Competitiveness Council on insurance stated that legislative changes were needed and new provisions required to tackle non-attendance at medical tests. It also recommended prohibiting claimants from introducing new information or details into court proceedings that were available but not submitted to the PIAB prior to the assessment. While respecting the independence of courts, we need to ensure that the PIAB can keep the maximum possible number of cases out of the court system, where, inevitably, legal costs as well as awards are added in.

I welcome this debate. As the National Competitiveness Council report on insurance states, it is important to obtain data forensically because so many elements contribute to insurance costs. Many of them have been listed here. Insurance companies have been making losses on their underwriting business in recent times, so on the face of it there is not a bonanza from their returns. Management fees represent a significant proportion of premiums and deserve to be assessed. Their reliance on investment returns, which are volatile, is an issue of impact. New capital requirements resulting from greater prudential sensitivity represent another factor. The key thing is to distinguish the matters that we can rightly expect policy to influence from the ones that will not be easily changed. That is the area the new Parliament can hope to influence, both through legislative work and through greater scrutiny of what is happening in this important sector. Insurance influences the costs facing ordinary families as well as the cost of doing business.

One of the key challenges for this Dáil is to drive forward economic recovery, which is really important. This depends on a series of decisions we must make concerning skills, investment and innovation, as well as making companies leaner and sharper with a better start-up environment. At the same time, we must also focus on serious challenges in public service areas, where we rightly need to frame ambitions and match those two key elements.

Success in meeting our ambitions in public services will be very much driven by our capacity to create an economy and an economic environment that creates the jobs and drives the enterprise sector and the tax revenues that come with it.

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