Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I welcome the opportunity to address the Dáil on the issue of insurance reform. This is a key priority for the Government as a whole and has been a key focus of my post as the Minister of State with responsibility for insurance issues.

As all Members of this House will be keenly aware, a well-functioning insurance industry is vital for a healthy and vibrant economy. The pricing and availability of general insurance has been subject to considerable volatility in recent years, in particular for some sectors. The vast bulk of the €4.6 billion domestic insurance market employing 28,000 people across all regions generally functions well for consumers. The main sectors are private motor insurance with 2.2 million insurance policies and home insurance with 1.3 million policies. We must not take this for granted as in the very recent past we have witnessed the failure of large domestic insurance firms. This has not been cost-free, with insurance customers still paying for this through the insurance compensation fund levy, which is applied to all policies.

To put the record straight, we must acknowledge there is no single policy or legislative fix to remedy issues around the cost and availability of insurance. With only one large domestic provider, the reality is that we are heavily reliant upon international insurers that operate in Ireland on a cross-border basis. Under the EU Single Market framework for insurance - the solvency Il directive - the Government and the Central Bank of Ireland cannot interfere in such matters.

While motor insurance has improved, with premiums falling by about 16% since the formation of this Government, issues remain in relation to some businesses with high levels of footfall such as those in the hospitality, retail, tourism, voluntary and child-play sectors in terms of public and employer liability cover. Indeed, data from today's national claims information database report published by the Central Bank shows 60% of all business policies are under €1,000, while 92% are under €5,000. For this reason, the Government has continued to prioritise domestic insurance reform as identified in the programme for Government. We are delivering on this commitment through the action plan for insurance reform, an ambitious multi-initiative, whole-of-government approach that seeks to tackle key insurance issues head-on, including award levels and the cost of claims, competition, fraud, system reform and the availability and cost of insurance for policy holders.

The reform is being delivered through a Cabinet committee sub-group that includes a number of Ministers: An Tánaiste, Deputy Varadkar; Ministers Donohoe, McEntee, McGrath and O' Gorman; Minister of State, Deputy Troy; and me. Resulting from the sub-group, the Government published the action plan for insurance reform in December 2020. The action plan sets out 66 actions to bring down costs for consumers and businesses, introduce more competition into the market, prevent fraud and reduce the burden that insurance costs can have on people, businesses and community and voluntary organisations.

I will outline some of these actions and the impact they can be expected to have. The implementation of the personal injuries guidelines to replace the book of quantum was delivered in April 2021. This was made possible thanks to the Judicial Council Act 2019 and was delivered six months ahead of schedule. I acknowledge the work of the Judiciary on this issue, which represents the cornerstone of our reforms.

There is already evidence that the guidelines are having the desired effect of lowering overall award levels. This impact is clearly seen in the latest report from the Personal Injuries Assessment Board, PIAB, covering average awards made by PIAB during the first eight months of the guidelines. This shows that the total average award was more than 40% lower compared to awards under the previous book of quantum, with the same drop being seen across motor, employers' liability and public liability claims. The average PIAB award is now slightly under €14,000 compared to almost €24,000 in 2020. Significantly, 72% of awards were for under €15,000, compared to just 30% of awards in 2020 being under €15,000.

Furthermore, while legal actions have been taken against the guidelines, I welcome the two recent High Court rulings on 2 June and 17 June which stated that the guidelines are constitutional and that the PIAB had acted correctly and lawfully in assessing personal injury claims with reference to them. The judgments are, however, still subject to appeal and until settled it will naturally take time for the full impact of the guidelines to be seen.

I have spoken to the industry on a number of occasions, as has the Oireachtas, and I have consistently restated the need for it to pass on the saving from these guidelines. It has been indicated to me that pre-guidelines, some €25 out of every €100 in motor premiums related to personal injury costs. Assuming the guidelines lead to an approximately 50% reduction in these claims and their associated legal costs, it would imply a reduction to this element of the premium paid by policyholders.

Another major achievement has been the introduction of regulations by the Central Bank to ban price walking for home and motor insurance, which comes into effect next week on 1 July. The price walking ban is evidence based. Importantly, this will mean that insurers can still offer discounts for new business, thereby retaining the benefits of switching for those who prefer to change insurance provider regularly. It will also facilitate potential new market entrants who wish to attract customers, thereby supporting healthy competition. It is worth reflecting that Ireland will now be the first EU member state to introduce such a ban for insurance products.

Another development has been the establishment of the office to promote competition in the insurance market within the Department of Finance. The role of the office, which I chair, is to assist in promoting competition in the Irish insurance market and therefore reduce insurance costs and increase the availability of cover, including for businesses. The office is working closely with IDA Ireland to bring new entrants into the Irish insurance market, including in areas that have been identified as pinch-points.

In all of these engagements I have stressed the importance for insurers to expand their risk appetite into pinch-point sectors that are experiencing issues with availability and affordability of cover, particularly high-risk and high-footfall areas.

This is a priority for the office. As noted already, however, the Government cannot compel insurers to cover individuals, businesses or even certain sectors of the economy. What we can do, however, is make the Irish market one that is more attractive to enter. Implementation of the action plan by the Government is the most important step in this regard.

Group schemes allow insurers to more effectively identify and control risks through standardising risk-mitigation strategies. These offer collective bargaining and purchasing power, which single entities cannot access. Some examples of successful group schemes that have emerged recently are: Early Childhood Ireland with Arachas and Allianz, which covers crèches and afterschool facilities; Play Activity & Leisure Ireland, PALI, with Berkshire Hathaway Speciality Insurance and Arachas, for play and activity centres; Horse Sport Ireland with Allianz, which provides cover for amateur equestrian events; and the Irish Association of Adventure Tourism, Fáilte Ireland and Arachas, which are working in this area for activity-related tourism businesses.

Looking to the future, fintech also offers new possibilities. This morning, I chaired the inaugural cross-Government fintech steering group meeting. InsurTech is providing the context for Irish start-up businesses in the insurance sector to, in time, help reduce premiums and stimulate the growth of a more diverse insurance market.

Deputies will be aware that earlier today the Central Bank published its second report on employer liability, public liability and commercial property insurance, covering the period up to the end of 2020. The report provides further insights into the cost of insurance, claims settlement and profitability of the insurance market in these specific areas. I recognise that the report goes up to the end of 2020. The Central Bank is looking to publish its reports in a more timely manner in future. This is only the second such report in this area. The reports will be more up to date in future.

I, along with the industry, wish to see genuine claims settled, but we also need greater efforts to tackle bogus and exaggerated claims. I welcome that there is a greater effort being made in the courts to call out such cases. There are several other achievements under the action plan which are important to mention, some of which address fraud. This includes: the enactment of the Criminal Justice (Perjury and Related Offences) Act 2021, which places perjury on a statutory footing for the first time; the establishment of an insurance fraud co-ordination office within the Garda National Economic Crime Bureau; and the introduction of new regulations on solicitors' advertising. All of this has been made possible through the work of the subgroup operating from the Cabinet.

Regarding the impact of ongoing reforms, motor insurance, which is compulsory for drivers, has continued to fall. The latest CSO data for May now show a reduction of just over 40% from peak prices in mid-2016. Indeed, the same data show that motor insurance fell by 10.9% in the year to May, at a time when inflation generally is running at 7.8% in the opposite direction.

Notwithstanding the fact that the action plan has facilitated progress to date, I acknowledge that there are ongoing issues in the insurance sector. Uninsured driving is a significant issue, on which I have had a number of engagements this year. According to the Motor Insurance Bureau of Ireland, MIBI, one in every 13 private vehicles on Irish roads operates without insurance. As we speak, there are 170,000 vehicles on Irish roads that do not have adequate insurance. I find that extraordinary. MIBI estimates that this increases the cost of motor insurance by €30 to €35 per motor policy. That means the people who are paying their policies are paying an additional €30 or €35 merely to cover the cost of the claims of the uninsured drivers on the roads. I want to deal with this issue. I have had positive and productive meetings with MIBI and the Department of Transport on the matter and it is welcome that the Minister for Transport's Road Traffic and Roads Bill 2021 contains a number of provisions to identify the scale of uninsured drivers in Ireland. This momentum should be built upon and all relevant stakeholders should explore how to target those drivers who refuse to purchase motor insurance, which is a mandatory legal obligation for everyone driving a car.

I also acknowledge the issue of business interruption in the context of the Covid-19 pandemic. As Deputies will appreciate, I cannot comment on ongoing test cases. These include matters of quantum and are still before the courts. Related to this issue is that of insurers deducting the value of State supports from valid business interruption claims. With pandemic supports for businesses, the primary focus of the Government and the Oireachtas was to get money to affected businesses as quickly as possible to ensure they could continue to operate. In that regard, measures such as the Department of Social Protection's recovery of benefits scheme were not envisioned in advance as part of the Government’s urgent response to Covid-19. This is a lesson to be learned from the pandemic and I hope that for all future State schemes, this House will remember that lesson and ensure that legislation is future-proofed to cover that issue. I am aware of calls for the Government to legislate to recoup the value of the moneys withheld by insurers. This was considered as part of the preparation of the Insurance (Miscellaneous Provisions) Bill. However, there were a number of issues with this approach, including constitutional difficulties with retrospectively legislating in this manner.

While we have had notable success under the action plan so far, there remain a number of outstanding actions. Three of these are key. The first is reforming the law on occupier's liability to rebalance the duty of care. Provisions have been approved by the Government for inclusion in a Bill that will address this issue. I acknowledge the work of the Minister for Justice on this, which is a key piece of our reform agenda. It demonstrates the issue at governmental level. That is why we need that Cabinet subgroup. The Department of Justice is fundamental in many of the issues I have been referring to and the Department of Finance, the Central Bank and the Department of Enterprise, Trade and Employment also have key roles. I have already explained how it relates to road traffic and the Department of Transport. It is a cross-Government approach. Reform of the duty of care is a key ask of both insurance reform campaigners, such as the Alliance for Insurance Reform, whose efforts I would also like to acknowledge today, and the insurance industry.

The next key action is to reform the Personal Injuries Assessment Board, PIAB. This is being managed by my party colleague, the Minister of State, Deputy Troy. We will bring forward a series of reforms including on mediation, retaining information, and the disclosure of information to An Garda Síochána, to reduce fraud, as well as tighten the Court's discretion regarding costs in litigation. I have met with the Garda Commissioner to discuss these matters. Drafting of this Bill is at an advanced stage. The Bill is on the priority list for publication during the summer session.

The further key action is enhancing the enforcement powers of the Competition and Consumer Protection Commission, CCPC, through the Competition Amendment Bill, which is currently before the Oireachtas. In addition, I am pleased that the Government's Insurance (Miscellaneous Provisions) Bill completed all Stages in the Oireachtas yesterday. It represents another important step on the journey towards greater transparency and openness in our insurance market. I would like to thank all Members of the Oireachtas for their input and assistance in getting the Bill through the Oireachtas in a prompt manner. I will continue to meet the chief executives of all major insurance companies operating here to ensure they honour their commitment to pass on the benefits of our reform agenda to policyholders by way of reduced premiums and increased insurance availability.

I again emphasise the importance of insurance reform to this Government. Under the action plan, a significant amount has already been achieved and the data on insurance costs, from both the CSO and the Central Bank’s national claims information database, speak to this. It is now important that we in Government, and in this House, redouble our efforts to ensure that key items of legislation, particularly those linked to the duty of care and PIAB reform, are progressed as speedily as possible through these Houses.

I am optimistic that delivery of these key reforms will increase both the affordability and availability of insurance products, to the benefit of consumers, businesses and community groups. I look forward to a constructive and informed debate. I thank all Deputies present for their attention.

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