Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

Cuirim fáilte roimh an mBille. The legislation has been introduced and the Minister of State talked about its swift passage, but let us call a spade a spade. We need its swift passage because the European Commission has begun proceedings because the Government delayed the transposition of this directive. The European Commission last month took the first step in infringement proceedings against the Government by sending a formal notice to the State for failing to fully transpose the motor insurance directive, which it was required to do last year, on 23 December.

The 2021 directive included legal definitions, minimum compulsory cover levels and provisions to compensate individuals involved in accidents in incidences where the insurer is insolvent. The key change in the directive, compared with the previous directive, is that, under its provisions, the victims of car accidents will receive the compensation they are due even when the insurance company is insolvent and member states will be required to establish and appoint compensation bodies to deal with claims that arise from these accidents. It also requires cross-border mechanisms so an injured party will be compensated by the compensation body in their member state of residence, with that compensation body then entitled to reimbursement from the equivalent body in the member state where the insurance company was based.

The Bill before us transposes Articles 10a and 25a of this directive and, as I said, this was supposed to have been completed by last year. Accordingly, the legislation will implement a number of measures and provisions under the 2021 directive. It will establish a body known as Comhlacht na hÉireann um Chúiteamh Mótair, the compensation body. It will also be responsible for dealing with the claims that arise from car accidents where the insurance company concerned is insolvent. Under this legislation, it will be the Motor Insurers’ Bureau of Ireland that is appointed to discharge this role. This is provided for in section 5.

Section 6 provides for the funding that will be made available to the compensation body from the insurance compensation fund to ensure it can pay claims as required under the directive. It provides that the compensation body will draw up a framework for the presentation and processing of relevant claims and that the claimant should receive claim payments within three months of the compensation offer being accepted.

Section 8 requires the Central Bank and the relevant insurance company to inform the compensation body of a decision by a court to begin insolvency proceedings against that company. The compensation body, Comhlacht na hÉireann um Chúiteamh Mótair, can then give notice of the insolvency to inform policyholders and injured parties so they are aware of and can avail of the new arrangements.

Under this legislation, the framework of the insurance compensation fund will be streamlined, operating as a one-stop shop for car insurance insolvency and ensuring claimants will be able to deal with the compensation body instead of having to deal with different insurers or liquidators regarding their claims.

An important provision of the directive which is provided for in this legislation is the move from a “host basis” to a “home basis” system. Under a “host basis” system, compensation is paid by the member state in which the risk is located. This means the scheme is targeted at the Irish customers of Irish and EU insurers rather than at the EU and Irish customers of Irish insurers. Under the new “home basis” system that is proposed, regulations may be introduced to set up a funding mechanism whereby insurers who are authorised in Ireland and exporting car insurance policies across the EU will contribute towards the cost of insolvency compensation. In essence, if there is an insurance company in another member state that sells insurance policies into our market, that member state will have to pay where that insurance company becomes insolvent.

There are also important auditing provisions within the Bill and I want to touch on some of these. Under section 16, the State Claims Agency will be required to carry out annual reviews with respect to samples of claims paid out by the compensation body, with the results of the audits to be presented to the Minister for Finance. This will ensure the compensation body has the information necessary to recoup money that has been paid out in error. One thing I note from the legislation is that the Minister will not be required to lay these reports before the Dáil. The question I pose is whether that would not be a desired requirement in the interests of transparency. Alternatively, will the State Claims Agency be required to publish these reports?

I would appreciate the Minister of State's comments in this regard, and we can tease that our further on Committee Stage.

Section 17 will also ensure the compensation body will not be allowed to pay out compensation above a certain amount until that claim has been audited by the State Claims Agency. That is a welcome provision. However, subsection (1)(a) provides that the Minister will determine the specific amount that will trigger an audit by way of a ministerial order. Will the Minister of State clarify the factors that will be taken into account in determining the relevant amount or has the Minister and the Department already decided on what that amount should be? If so, could that be shared with the Dáil today?

Section 18 will require the State Claims Agency to submit a report to the Minister where a car insurance company has become insolvent. Again, my question, similar to that regarding section 17, is whether such reports will be laid before the House or whether they will be published in such circumstances if they arise. I would also welcome clarification from the Minister of State with regard to that.

The legislation has been introduced to transpose elements of the motor insurance directive. I understand that, late in the day, this is being done by the Department at pace, and I appreciate the work the Department has put into this. However, I do question why it took the Commission to begin infringement proceedings against the State for failure to transpose this directive by the deadline that was set, which was 23 December of last year. For us in the finance committee, it is not a situation where we like to go, and I note the Government never allows for the waiving of pre-legislative scrutiny for any Opposition Bills, but we did waive pre-legislative scrutiny for this. Also, uniquely, which I am very uncomfortable doing but did support, we allowed a slot on the finance committee before this has even passed Second Stage. It is not a good position we and the Minister of State, who is responsible for this, are in when we basically have the European Union taking a case against Ireland for not transposing into legislation in time a directive that is about protecting consumers with regard to insurance. That is regrettable from a scrutiny point of view and in respect of legislation. Sometimes, something can go wrong in how we transpose it, and when legislation is rushed or adequate time is not provided to hear from external people, then sometimes it can be got wrong, and there are examples of that down through the years.

These provisions in the legislation are going to provide greater protections for consumers and injured parties in instances where insurance companies go insolvent, and the establishment of the compensation body should make it easier for claimants to receive compensation following their insurer's insolvency, rather than having to deal with liquidators in a haphazard and disjointed fashion, allowing them to instead deal directly with the Motor Insurers' Bureau of Ireland. The move from a host-based to a home-based system is also significant.

Of course, this legislation also provides an opportunity to discuss the wider issue of consumer protection and consumer interest in the insurance market. Consumers continue to pay too high a price for insurance cover, and we have seen that over recent years, where the insurance industry records skyrocketing and bumper profits. This is despite a fall in the cost and number of claims since the pandemic. Indeed, we have seen car insurance prices rise by 7% in the past year alone. For years, the motor insurance industry made bogus claims regarding insurance fraud, and it has called for reform to reduce the cost of claims. That is what it got when we introduced the personal insurance guidelines more than three years ago, which have substantially reduced payouts for third-party injuries. What we have not seen are the benefits of these claim cost reductions being passed in full to customers. Instead, what we have seen is insurance companies saving and pocketing these and insurers' profits being bolstered.

We need to address this. I introduced legislation that would require insurers to report to the Central Bank the savings they have passed on or failed to pass on to their customers. This would be an effective way to increase transparency and apply pressure on insurance companies to do the right thing and pass these savings on to their customers, as they told me and other members of the committee they would do if we introduced the reforms, which we have.

I hope with this legislation I have, which will come before the finance committee in the second week of July for Committee Stage, that the Government will work with me and Sinn Féin to get it over the line. The insurance industry cannot be allowed to drag its heels, and that is what it has done. It has dragged its heels and filled its pockets on the back of the reforms we have introduced in this House, and it is acting against the interests of consumers. I welcome the opportunity to speak on this legislation, the Motor Insurance Insolvency Compensation Bill. I look forward to scrutinising it further on Committee Stage and I am happy to work with the Minister of State. As I said, we have waived pre-legislative scrutiny and approved a slot in the coming weeks to allow this to go to Committee Stage. I am sure we will also work with the Minister of State on Report Stage as well to try to get this across the line. I would appreciate it if, at some stage, the Minister of State could respond to some of the issues I raised.

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