Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

I thank the Senator for raising this issue. I welcome the opportunity to discuss in the Seanad the important matter of the cost of insurance and to highlight the actions the Government is currently taking to address the issues.

An adequately reserved, cost-competitive insurance sector is a vital component of economic activity and financial stability. The current high cost of insurance is a concern for the Government. I know it is a concern for the Senator and citizens. I also know that it is an important element for job potential and creation outside of Dublin and, indeed, in all parts of the country.

While the provision and pricing of insurance policies is a commercial matter for insurance companies, this does not preclude the Government from introducing measures which may, in the longer term, lead to a better claims environment. Different reasons have been put forward by various interested parties to explain Ireland's current increasing insurance costs. Motor insurance appears to be particularly affected, with the cost of premiums increasing significantly in the past 12 months. Reasons often presented include the increased level of insurance claims and the increasing value of compensation awards. Insurance fraud is also considered to be a contributory factor. Others have highlighted that the highly competitive nature of the domestic market for non-life insurance in recent years has begun to impact on firms' underwriting profitability, with underwriting losses reported for a number of high-impact firms. This has been compounded by the fact that investment returns that have traditionally compensated for underwriting losses are currently very low due to the existing low interest rate environment.

To examine these issues in more detail and assess the options for the Government, the Minister for Finance has established a task force in his Department to undertake a review of various aspects of policy in the insurance sector.An important element of this review is an assessment of the factors contributing to the increasing cost of insurance. This work will be progressed through a working group on the cost of insurance, of which I will be chairman. The working group consists of representatives from all relevant Departments and agencies and will consult with relevant stakeholders. The aim of the review is to try to identify measures that can reduce the costs of insurance in the short term and also on a more long-term basis. Among the issues to be examined is data availability to inform policy in this area, taking into account what information or data is required to be in place, what is currently available and what will be provided through the introduction of Solvency Il, and to identify any shortfalls. Options such as a national claims register and motor insurance policy database will be evaluated.

This is a complex area. It would appear that there are a wide range of factors contributing to the increased cost of insurance. The purpose of the review is to identify credible and sustainable solutions that take account of the nature of the problem as it affects consumers in the form of higher costs. However, it is also important to develop a solution that facilitates an increase in the capacity of the market. Moreover, it is necessary to take account of the fact that we want a well-capitalised and robust insurance sector, and this must be reflected in the final outcome of our deliberations. The latter point is essential if we are to avoid the risk of unrealistic competition on price as companies try to gain market share at the expense of their underlying solvency.

It is my view that even short term solutions to address the cost of motor insurance need to be considered by the review group as part of a comprehensive package of reforms. Failure to do this could compound an already difficult market position, with the risk that Ireland would become a more unattractive place to conduct this type of business if the situation is not fully thought through. The review will be completed over the coming months. I have noted the Senator's proposal for the Tánaiste and Minister for Justice and Equality, Deputy Fitzgerald, which we will also consider.