Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I move amendment No. 1:

To delete all words after “Dáil Éireann” and substitute the following:

“is concerned that:- on average consumers have been faced with an increase of over 60 per cent in the cost of their motor insurance since January 2014, with a 34 per cent increase in the last 12 months alone but that in many cases consumers have received renewal quotes with prices that are multiple times their most recent premium;

- commercial users have also experienced large increases in their motor insurance premiums;

- the insurance industry investment and underwriting losses are directly leading to increased premiums for consumers;

- many young drivers and many people in rural areas reliant on private transport are effectively being forced off the road by unaffordable premiums; and

- the dramatic increase in premiums will lead to a greater number of uninsured drivers on our roads;notes that:- motor insurance is compulsory in the State yet not provided by the State;

- there is an obligation on the State to act when motor insurance premiums become unaffordable and put families and businesses under severe pressure;

- when the issue of industry profitability was previously examined by the Motor Insurance Advisory Board in the 1990s, it was found that the Irish insurance sector had profitability levels that were multiples of the United Kingdom;

- up to 80 per cent of personal injury claims lodged with the Injuries Board are not subsequently settled through them;

- greater transparency regarding the cost of settling claims or awards in personal injuries cases that do not go through the courts or the Injuries Board is needed;

- an update of the Book of Quantum is currently being undertaken; and

- a reduction in resources for the Garda Traffic Corps puts lives at unnecessary risk;welcomes an emerging trend where cases of suspected insurance fraud are being successfully contested in the courts by insurers;

notes that the evidence available points to the failure of the investment policies of the insurance industry as the largest single cause of the dramatic increase rather than any legal or policy decision by the State or State bodies; and

calls for:- the incoming Oireachtas Finance Committee to examine the reasons for the increase including through an examination of the business model underpinning motor insurance cover in the State;

- the immediate publication of the Department of Finance’s reviews of policy in the insurance sector when it is complete, or the publication of its work on motor insurance if completed earlier;

- a proposal from the Government for legislative action, including through the strengthening of the Financial Services Ombudsman to give greater protection and clarity to consumers in the sector and specifically to prevent consumers whose circumstances have not changed from facing increases completely out of line with industry average increases from year to year without any rationale being presented to them;

- the more timely and detailed publication of data on the performance of insurance companies by the Central Bank of Ireland and an examination of the use of the Central Statistics Office, or another suitable body, to provide independent and full data on the sector;

- a review of the Central Bank of Ireland’s regulation of the motor insurance sector over the past decade with a view to ascertaining if it, as regulator, has protected consumers and acted as necessary to maintain a sustainable motor insurance sector;

- the establishment of a task force along the lines of the successful Motor Insurance Advisory Board, which led to a considerable fall in insurance costs up to 2013:

- to tackle rising motor insurance premiums;

- review the role of the Injuries Board; and

- examine the reasons for the current turmoil in the insurance market;

- improved transparency of insurance industry profits and the establishment of a national claims register and a motor insurance database to record data across the sector;

- enhanced disclosure for consumers around policy renewal notifications including an obligation on insurers to inform customers of the change in their premium from the previous year;

- legislative reform to increase the penalties for false and exaggerated claims;

- greater clarity as to the respective roles of the Motor Insurance Bureau of Ireland and the Insurance Compensation Fund;

- a review of road traffic legislation to prevent the use of technicalities to avoid a conviction for motoring offences;

- improved regulatory oversight domestically and at European level, including the filling of vacancies in the Central Bank of Ireland Enforcement Directorate which deals with insurance firms; and

- action to protect low-income and vulnerable customers from unfair practices by insurance firms, including a refusal to quote for older cars which have a valid National Car Test (NCT) certificate.”

I am very happy to have the chance to contribute. I welcome Deputy McGrath's motion and hope that he and other parties can support the amendment I have put down, which adds to the proposal he has put before the House and focuses the motion on some key elements that may be lacking in the original proposal.

Recently, under a freedom of information request, I received a letter from the Governor of the Central Bank to the Minister for Finance from last August, wherein the Governor states that insurance companies "took a very optimistic view of future economic outlook, built up unsustainable overheads and followed an imprudent pricing and underwriting approach". In a letter to me from the Central Bank, the Governor went on to say that the combination of low interest rates with developments in the claims environment is forcing insurance companies to increase motor insurance premiums to reduce their loss. This combination the Central Bank has identified is where focus needs to be put. Deputy McGrath's motion is very strong in terms of the task force. It is something I support, looking at the claims environment, but it can be strengthened by accepting my amendment, which provides a balance by including measures to look at the insurers themselves and what blame they might carry. We cannot fall into the trap of missing the wood for the trees. In 2005, the Competition Authority produced a report on the issue with a wide range of recommendations. That was 2005, yet we are only today, hopefully, agreeing the motion. Only last year, the National Competitiveness Council recommended going back to that report because many of the key proposals remain unimplemented. Government after Government has ignored some of those recommendations for over a decade. One of those was the transparency in relation to the claims that have been paid out, which is in the motion tonight.

The average figure for increases in premiums last year was 34%, as we have heard during the debate. That is only part of the story. For many, the increase is 100%, 200%, 300% and sometimes even more. Drivers whose driving records have not changed, who have not committed fraud and who have done nothing whatsoever to justify an increased premium, suddenly find themselves facing what can only be called extortionate quotes. This State demands that all drivers have motor insurance, yet it does not provide insurance through any State company. The private sector is left to provide insurance but it can charge whatever it wants. There is competition but not all drivers are empowered enough to know they can haggle with the insurance company and get an automatic reduction or shop around and go to other insurers. This is the nub of the matter. There are other issues around Setanta Insurance, around the book of quantum and how it is being used by judges and around fraud, but none of them, even if they were all put together, could possibly justify a driver's premium being increased by multiples of the previous year's premium. It is not right and the State must intervene to stop it.

What we need is real action, and that is what my amendment seeks to do. At the very least, a person who has not been involved in an accident, has not made a claim and has not had additional penalty points, yet who has seen his or her premium increase by 200% - or 300%, in the case of my sister - should be entitled to a rationale from the insurance company as to why that individual has become three or four times riskier than he or she was on that day 12 months ago. Many of those people would welcome a 34% increase in their premium but these individuals are being put off the road by insurance companies which, in my view, no longer want to insure them.

This State cannot intervene because of European rules in respect of setting the price of insurance but insurance companies have to price based on risk. As discussed earlier, motor insurance is not optional for people and it is not a luxury. It is a legal requirement the State insists on. The State, therefore, has a duty to make sure the price of insurance is fair, transparent and affordable. The EU says the State cannot set prices but it also says that premiums and prices must be based on risk. Where is the evidence that this is happening? How can a quote increase of 100% or 200% be justified on the basis of risk when no factor determining risk has changed? It simply cannot happen. Some people are facing 30% increases and others face 20% increases, but some people face increases of 200% and 300%. It makes no sense.

My amendment proposes that the incoming finance committee take on a thorough examination of the reasons behind these huge hikes as one of its first tasks. That does not take away from the task force called for in the motion. It is the duty of the finance committee, in public session, to start asking questions of the industry. I have called for a review of the Central Bank's role as regulator of the industry, where it was overseeing what the bank now recognises as imprudent behaviour. Those are not my words. I know the Minister said in his speech that insurers are highly regulated and all the rest but the Central Bank is telling us they were involved in imprudent behaviour and conducted imprudent underwriting. The Central Bank has also written to the Department of Finance seeking additional powers to regulate some of this industry. There needs to be a review of the powers of the Central Bank. There are also longstanding vacancies in the Central Bank that have not been filled and I welcome the Minister's comments today that they are to be filled soon.

For some time, in answer to my parliamentary questions, the Minister has been telling me that a review was being undertaken by his Department and it was due to report within weeks. The Minister now calls this review the task force. He is making a mockery of the Dáil if he is suggesting the review that is being undertaken, which we have been told about in the responses to countless parliamentary questions, is now the task force that is being asked for in this motion. If the Government is going to accept the motion, it must implement it in the spirit in which it is brought forward and agreed by this House. When will the Minister publish the report and will he do so immediately upon receiving it?

I have already brought forward legislation protecting consumers by strengthening the Financial Services Ombudsman and I firmly believe this office can play a greater role in protecting consumers from unacceptable and inexplicable jumps in premiums from year to year. That may require legislation and I note in the legislative programme today that the Bill to merge the Financial Services Ombudsman and the Pensions Ombudsman is imminent. The opportunity to empower the Financial Services Ombudsman must be taken. There has been much talk of transparency tonight, and rightly so. The Central Bank could be doing more to inform customers, as the Competition and Consumer Protection Commission is trying to do. Sometimes the Central Bank hides behind section 33AK as a way of not providing the information that is required and that needs to be examined so that consumers have full information on insurers.

These are the steps we can take on the claims environment, side by side. Hopefully, this will reduce prices or at least prevent another reason for an increase. The Insurance Compensation Fund should be allowed to pay up to 100% and have its threshold increased, alongside clarity on the role of the MIBI in the event of liquidation. This is one of the major concerns. This is why the CEOs of the insurance companies came to Government Buildings and sat with the Ministers, Deputies Donohoe and Noonan. In an unprecedented move, the heads of the industry came together, saying this was causing chaos within the system. It could be resolved easily. The reason claimants want to be paid from the compensation fund is that they get 100% and there is no threshold for the amount of payments. It is the individuals who will end up paying it, whether it is through the Insurance Compensation Fund or the MIBI. If that reduces the immediate costs in terms of what the Central Bank estimates is a 3% cost of insurance, then it should be transferred into the Insurance Compensation Fund, but only with those two changes to the fund, which would allow for 100% payouts and an increase in the threshold.

It is time for a balanced debate on the issues. It is not sustainable to say that prices would tumble tomorrow if only we toughened up on fraud. I have heard during this debate and other debates that we have the most sensitive necks in Europe, as was said in a previous debate, and that we pay out so many times more than counterparts in Britain and elsewhere for whiplash injuries.

That is simply not true. These are exaggerated industry claims that are being peddled to suggest that the rises are all to do with fraud, compensation, legal fees, etc. All of that is relevant and part of the mix which has to be addressed, but they cannot justify the excesses that we are seeing. There are things that can be done in these areas. I believe we can all agree that a claimant should, for example, attend for a medical examination, should the Injuries Board process demand it, but that is not happening in all cases. Unfortunately, there are no straightforward answers and no silver bullets. There is a lack of transparency and information which hinders the consumer - and us, as representatives of the people. That situation could be sorted out if the Central Bank or, as I suggested, the CSO were to take on the role of publishing all the data in a timely fashion. The figures we do have from the Central Bank are clear. There have been no more claims paid out in the last couple of years than in the years before. There is also a deeply worrying question about what the Central Bank called the industry's imprudent pricing and underwriting approach. No amount of tweaks to legislation can change that.

I shall conclude now, and I apologise for eating into my colleagues' time. Information on claims paid out by the motor insurance industry from 2010 to 2014 is published on the Central Bank's website. In 2010 it was €1.17 billion, in 2011 it was €1.5 billion, in 2012 it was €1.069 billion, in 2013 it was just less that €1 billion, and in 2014 it was €1.078 billion. There is no dramatic increase in claims being paid out, yet we have seen a massive decline in underwriting losses and a massive decline in the investments these insurance companies were making from premiums that were gathered from individuals. There has to be a rounded discussion regarding this matter, and I appeal to Deputy McGrath and to the Government to accept the amendment and to actually implement what the House is hoping for. I hope the motion, as amended, will be passed tomorrow night.

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