Thursday, 14 January 2016
Motor Insurance Coverage
I thank the Senator for raising this current and relevant matter. The Minister for Finance is responsible for the development of the legal framework governing financial regulation and is concerned that there should be a stable insurance sector and that risks to policyholders and the wider financial system are limited. He is aware of reports on the increasing cost of motor insurance. However, the ability of the Government to influence insurance pricing is limited, as insurance companies are required under European law to price in accordance with risk and neither the Minister nor the Central Bank of Ireland has the power to direct insurance companies on the pricing or provision of insurance products. The European Union framework for insurance expressly prohibits member states from adopting rules which require the prior approval or systematic notification of certain matters, including general and special policy conditions and scales of premiums. Furthermore, the EU framework provides non-life insurers with the freedom to set premiums. Insurance companies consider a number of risks when determining the premium for a proposed insurance policy, whether it be a general insurance policy such as motor or home insurance or a life assurance policy. A premium is based on the actuarial calculation of risk.
Insurance Ireland has advised the Minister that motor insurers make their own individual decisions on whether to offer cover and what terms to apply. They use a combination of rating factors in doing this such as the age of the driver, the type of car used, claims record, driving experience, the number of drivers, how the car is used, etc. Insurers do not all use the same combination of rating factors; prices vary across the market and consumers are free to choose. Insurance companies price in accordance with own past claims experience. For example, where the age of a car is a factor, different insurance companies use different age thresholds. It is important to note that as a result of the implementation of the EU gender directive in the motor insurance sector, there is a statutory requirement in Ireland for the provision of unisex premiums and benefits in insurance. This means that insurers are prohibited from discriminating on the basis of gender.
As stated, the ability of the Government to influence insurance pricing is limited, but that does not preclude the Government from introducing measures that may, in the longer term, lead to a better claims environment that would facilitate a reduction in claims costs. The Department of Finance has embarked on a review of the insurance sector which is being undertaken in consultation with the Central Bank of Ireland and other Departments and agencies. The objective of the review is to recommend measures to improve the functioning and regulation of the insurance sector. The review is being conducted on a phased basis, with the first phase reviewing issues in the motor insurance sector. As part of this first phase, the first meeting of officials from the Departments of Finance and Transport, Tourism and Sport took place on 7 January. Progress reports will be submitted to the Minister for Finance as the review progresses, with a final report expected within 12 months.
In the event that a person is unable to obtain a quotation for motor insurance or considers that the premium proposed or the terms are so excessive that it amounts to a refusal to give him or her motor insurance, he or she should contact Insurance Ireland quoting the declined cases agreement. Under this agreement, the declined cases committee of Insurance Ireland deals with cases of difficulty in obtaining motor insurance.