Wednesday, 12 March 2003
Motor Insurance: Motion.
I am grateful for the opportunity to bring this matter before the House. I had hoped that because the motion was phrased in such non-contentious terms it might not have been subject to an amendment from the Government. I had no ambition to put down a motion which is contentious or adversarial. I hoped it would be agreed so that we could go away with a joint resolve to act in the interests of young drivers.
I am disappointed by the Government amendment because I had thought the placing of this subject in the programme for Government as a matter of great urgency to both parties was genuine. This amendment indicates that the delay we have witnessed already in bringing down the price of premiums, which has not happened, may be an indicator that we will not see much action on this issue in the lifetime of the Government. Some of the initiatives referred to in the amendment may become instruments of delay and I am disappointed in that regard.
Car insurance is a particularly special product for one reason, that is, it is compulsory. Everybody who wants to hold a driving licence is compelled by law to go to privately run insurance companies, which are under very little compulsion by law. That may make me sound like some sort of an interventionist in the free market, which I have always have been – although Senator O'Toole may not be – but when people do not have any choices, the Government has the option to police this area properly and ensure it does not exploit the those who are compelled to be part of that process. Car insurance is an example of where people have been exploited by one of the great cartels. It is different from the banks, which benefit as cartels from the inertia of their customers and from the fact that none of us like to switch around because of laziness, fear, culture, cost and other complicated reasons. However, it is not the same in the case of car insurance.
Everybody who wants car insurance has to get a licence. What does that mean in modern Ireland and in the current situation? It means that young people, who are the most vulnerable, are being exploited. Young men and women are being exploited in different ways by the insurance companies. The premiums they pay are extremely high by any global or European standards.
Nobody will maintain that, in statistical terms, young men in particular are not the most dangerous group of drivers. As everybody has seen, the statistics show that what are called the responsibility rates for young drivers – particularly young males – are extremely high. The second highest responsibility rates are among young women. The insurance companies have seized upon these responsibility rates and have imprinted them on the public mind so successfully that they have been able to punish these young people with exorbitant rates, proportionately far higher than the number of accidents which they cause, according to the statistics. The safest group is older women, the second safest group is the middle aged, the third is younger women and young men are the most dangerous. Statistically, the situation is now such that insurance companies and the public can justify penalising young drivers to such an extent that they cannot get insurance. I do not think this is justified.
Insurance companies are exempt from the Equal Status Act, rightly or wrongly, and the criteria which they use are age, gender, class – a job, in other words, which is class to some extent – and location. I suggest they ought to use the safety record as the priority in respect of a young person. The age criterion which they use is an extraordinarily crude instrument. What about the young men and the young women who have seven years of safe records? That is possible for a 25 year old. Those people are being penalised for the very dangerous people who are in that group. That is unfair. Those people should not have to pay for the excesses of other young people or of older people. There a lot of very dangerous drivers amongst the aged and the middle aged.
The Irish Farmers Journal recently published a table giving the example of a 24 year old man with a provisional licence who went to various insurance companies. The first company, AXA, refused him on the grounds that he should be over 25 years of age. Eagle Star and First Call Direct refused to give him a quote because he was under 27 years of age. Quinn Direct accepted him and quoted €4,000 third party fire and theft. This is ridiculous. The company asked only for his age. Hibernian and One Direct did not quote as he did not have four years no claims bonus. FBD does not quote for provisional licence holders. There are various other issues involved there such as whether provisional licence holders should be allowed to drive at all.
If one took the example of a young woman in that situation she would receive more quotes but her quotations would certainly be higher than the value of the car. This is serious discrimination. If one were to use the example there of someone who had a full licence the person would receive more quotes but the premiums would be utterly unacceptable. The result of this is that young people who have to drive have to borrow money and get into debt to get insurance, which is current expenditure, thus putting themselves into a very difficult financial situation.
The statistics that I have seem to show that a young man with a provisional licence is only a third more likely to have an accident for which he is liable than an old woman, who is in the lowest risk category. That would indicate that his premium should be about a third higher than hers. This is not the case. His premium is significantly higher.
That is a very brief summary of the problems, and the victims and groups who are suffering under this regime. The difficulty is that this problem has existed for a very long time. It has been discussed but a solution is difficult to find in what is supposedly a free market, yet there are things which could be done immediately which might force insurance companies to reduce premiums or which might allow more competition in the market. The first is to improve driving standards. I welcome the Government's decision to introduce penalty points. That is part of the amendment, which is absolutely unnecessary, but that initiative is something on which I think we all agree. It has reduced the number of accidents and will continue to reduce the number of accidents and fatalities. It is an initiative which has taken courage and has worked very quickly. This type of problem needs to be tackled with the sort of courage with which the Minister for Transport has tackled the penalty points issue.
The alcohol limit should be reduced to zero, certainly in the case of provisional drivers. That probably will not happen because of the strength of the alcohol lobby group. Provisional drivers should not be on the roads. Costs should be cut in this industry, for example, legal costs constitute about 42% of the claims made by insurance companies. The compensation culture, whereby people make fraudulent claims and get huge sums of money, should be reduced but above all there should be competition in the market.
Everyone here knows that this issue has been referred to the Competition Authority. No doubt the Minister of State will mention that in his speech. The Competition Authority will report on this issue in a year's time at the earliest and when it reports some think tank will be set up to consider it and it will come before some committees of the Oireachtas. It will be another two or three years before legislation is introduced and although the MIAB reported on the issue over a year ago there will be five years between that report and legislation.
We do not need a Competition Authority report. This issue has already been tackled. What we do need is more competition in the market – I wish I had time to elaborate on this – so that the insurance companies could not run this extraordinarily privileged cartel which allows them to charge people who are compelled by the Government to have insurance.
I regret and oppose the amendment. I applaud some of the sentiments in it but not the action in it. I oppose it particularly because of one sentence, "recognising the serious implications of the events of September 11th in the US for the global insurance industry particularly the costs of re-insurance". What has that got to do with motor insurance? That is an apology for the activities of the insurance industry and I do not want to hear this or any other Government apologising for this industry which has had its own way for too long. For that reason alone I would oppose the amendment. I hope that this debate will prompt urgent, constructive measures from the Government, not waffle about how they share the sentiments which I have expressed.
I second the motion. I wish to make a formal declaration of interest, since I am member of the Personal Injuries Assessment Board.
I very much share Senator Ross's view that it was entirely unnecessary to table an amendment. I agree that we should make no excuse for the insurance industry. I have seen surveys showing that insurance costs have risen far higher in Europe, including Ireland, than they have in the US since the 11 September 2001 attacks. I see re-insurance companies go out of business, and we all know what Swiss Three went through in the first few months afterwards. However, we also know what they have done for the past 50 years and what they will do for the next 50. They are not in the risk business. One of the reasons we need this kind of debate and these kinds of decisions is that insurance companies, despite the popular view, are not open, liable or exposed to risk. They do not operate by taking chances. They cover others' risks without accepting any themselves. They work out the cost of providing people's insurance, and to those costs are added the administrative costs and the profit. That is how they work out the premium.
That simple list is important because there is no great pressure on insurance companies to reduce costs. It makes no difference to their bottom lines. The higher the premia, the greater their percentage increases will be. If they have a vested interest in any direction, it is in the way things are currently moving. I say that not in any accusatory way, for it is a statement of fact. We must ask ourselves how to approach the issue. If I work backwards taking the points raised in the Government amendment, I find myself in agreement with 99%. The line about the effects of the 11 September 2001 attacks is the only one that could easily be dropped, for I do not see why we need make that excuse for the insurance companies.
The problem stems from the costs: the compensation paid per accident, the cost to whomever when someone has an accident. Every step of that way, a cost control is required to bring Ireland into line with other countries. When I say "cost control", I do not mean "price control", for the largest element of cost in accidents is legal. Any number of surveys have been conducted, and statistics are available from all sorts of viewpoints – from Deloitte & Touche in 1996 up to IBEC in 2001 – showing that legal costs in settling accident claims account for somewhere between 25% and 50% of the total. In many cases, the legal costs are higher than the net award. We cannot live with that reality.
For that reason, I hope that the Minister will dismiss out of hand the self-serving report that the legal profession commissioned to stop any useful movement by the Government to make accident settlements cheaper. It does not stand up to inspection. If someone wishes to write such a report, I want to see it paid for and carried out by a person with no vested interest whatever. All the questions can be answered. There is no free market. One of the great conundrums about this is, if insurance companies in Ireland are so profitable, why all the other insurance companies in Europe do not set up business here now that we are all together in the euro zone. The reason is that, when they see the mess that we have here, they will not come near us. On the Continent, in most cases, if a person has an accident, certain things click into place. There is firmly established pay-related social insurance covering loss of earnings and so on, meaning that it does not form part of the claim. The general medical system of the country will pick up almost all of the medical costs. Those two cost elements are therefore removed.
We could be starting to deal with those issues. The PIAB is currently examining them regarding personal accidents, excepting motor insurance, to develop a model. The next step for the PIAB would be to deal with motor insurance. We are taking this route because we know there will be legal resistance against every move to make the marketplace more liberal or easier for customers. The other huge issue that we have never addressed is the method by which people are compensated, even allowing for the form of compensation. In every other country that I have examined, there is a book of quantum that, crude as it may sound, allows a range of compensation for whatever type of injury a person suffers, be it the loss of a limb, an eye or a finger. People work on that basis.
I will now state how a new system might work, tying in with what Senator Ross has said. If we could deal with those matters, we could say to someone who has, for example, suffered a serious accident resulting in a limp that he or she can go to court to fight, with a likely sum of compensation falling within a certain range. The person can, however, make a deal to receive that sum now. If he or she is happy, and both sides sign up, we have effectively halved the costs. That is a possibility, and the PIAB is starting to develop such strategies regarding general accidents. It is its intention to examine them in motor insurance too. Dorothea Dowling, the chair of that group, is determined to fight against any obstacles that come our way, as are the other board members.
I thank and congratulate Senator Ross for tabling the motion. I hope that I have touched on one or two ways in which the Government can encourage progress. On the basis of what Senator Ross said, it would be appropriate to accept our motion. It does not in any way undermine the Government's position; it has not even criticised it. Our aim was to achieve a co-ordinated view, with us all working together. We must give the Government the necessary support to realise that. I urge Members to accept the motion and Senator Leyden not to move the amendment.
I move amendment No. 1:
After "drivers" to insert the following:
–that the major determinant of the price of insurance in Ireland is the cost of personal injuries claims;
–the proportion of the cost of claims accounted for by legal costs;
–the cyclical nature of the insurance market;
–commends the action of the Government in undertaking a comprehensive set of measures by a number of Government Departments as contained in the Agreed Programme for Government to bring about a reduction in the cost of insurance,
–commends the initiative which the Tánaiste has undertaken with the Competition Authority, on a study of competition in the provision of non-life insurance, with particular reference to motor insurance, employers' liability and public liability insurance, including the factors inhibiting foreign insurers from entering the Irish market.
–recognises the importance of the implementation of the recommendations of the Motor Insurance Advisory Board (MIAB), the priority which the Government attaches to their implementation and to the establishment of the Personal Injuries Assessment Board,
–commends the Government's introduction of a system of penalty points for speeding offences,
–notes a decline in the number of fatalities and in the number of serious injuries on the roads between 1997 and 2001 and, more recently, since the introduction of the penalty points system.
I thank Senators Ross and O'Toole, who are experienced in both business and insurance, for their contributions. I would like us to agree on a motion of the House so that there is no division. I accept the bona fides of both speakers and appreciate that they are endeavouring to effect changes.
I recognise the motivation behind the Senators' motion, which I believe is generally acceptable to the House. The Government, the Tánaiste, Deputy Harney, and her Department are making tremendous efforts to try to tackle this issue, which is a priority. The attacks on 11 September 2001 were an international tragedy that affected everyone and I accept Senator O'Toole's point that they have been used by insurance companies here as an excuse for increasing costs. I call on the Senators who moved the original motion to indicate if they agree to the amendment it.
I am delighted and very grateful. Both Senators have made a great contribution.
Everyone is concerned about this fundamental issue which affects young people in particular and is the source of the greatest number of representations made to Members of the Oireachtas. I previously served as Minister of State at the Department of Industry and Commerce. Although I did not have direct responsibility for the relevant section of the Department, I am aware that this area has always given rise to major difficulties and successive Governments have tried to tackle it in many ways.
The recent contribution by the Minister for Transport has had an enormous effect on reducing the level of fatalities on the roads. Although this should be reflected in a reduction in motor insurance costs, that is not always the case. Some years ago there was an agreement that there would no longer be two senior counsels and a junior counsel appearing in court cases and I believe legislation was passed. While this was supposed to lead to a major reduction in the cost of premiums, unfortunately it did not do so.
While the insurance market in Ireland is not very competitive, it is also not very profitable. It is difficult to discover what are the profit margins of insurance companies. As Members are aware, the Joint Committee on Enterprise and Small Business and the Department are examining this issue. Between 2000 and 2002, the previous joint committee met representatives of many organisations. While the current joint committee deals with insurance in the broad sense, it also deals with motor insurance particularly for young people.
The Motor Insurance Advisory Board report on reforms of the motor insurance market published on 17 April 2002 made 67 recommendations. The Government accepted the report's findings and took steps to implement the recommendations. Since then, work to drive forward the Government's insurance market reform programme has included: the appointment of a cross-departmental industrial implementation group; the publication of the MIAB action plan; the establishment of a ministerial committee, chaired by the Tánaiste and incorporating the briefs of Enterprise, Trade and Employment, Transport and Justice, Equality and Law Reform, to oversee implementation of the MIAB recommendations; and the establishment of an interim Personal Injuries Assessment Board, PIAB, chaired by Dorothea Dowling, author of the MIAB report.
I congratulate our colleague, Senator O'Toole, on his appointment to the interim committee. He brings to it tremendous experience through his role as a Senator and his work with the INTO and as president of ICTU. I am delighted we are showing faith in our elected representatives and people of the calibre of Senator O'Toole, or any other Senator, are not seen to be unsuitable because of membership of the Oireachtas.
I was delighted when the list was published and issued to us at the committee. Who has more experience of dealing with legislation than Members of the Oireachtas? The appointment brings to that organisation a direct link between it and the Oireachtas and the experience gained by Senator O'Toole will be made available to the House.
Other Government initiatives in this area include: a joint study by the Competition Authority and the Department of Enterprise, Trade and Employment into the insurance sector to identify anti-competitive practices and other constraints in competition in the non-life insurance market, with particular reference to motor insurance, employers' liability and public liability insurance; and the establishment of an Independent Financial Services Regulatory Authority, IFSRA, under the aegis of the Department of Finance, to improve financial regulations and look after the interests of consumers.
The details of the insurance industry are well known to the public. The total premiums from motor insurance for 2001 came to nearly €1.7 billion or 1.5% of the gross domestic product. Ireland has the highest litigious population, with significant court awards. There was a 14% rise to 8,323 in the number of personal injury cases started in the High Court in 2001. In the same year, the High Court disposed of 9,323 personal injury cases and had 10,744 cases in hand. Third party motor insurance is compulsory and differs from many other products or services in that there is a limit on consumers' ability to not purchase or to substitute cheaper alternatives.
As I should have said at the outset, I welcome the Minister of State at the Department of Enterprise, Trade and Employment, Deputy Michael Ahern, who is well aware of the insurance situation. Given that the Tánaiste is directly involved with this issue, I have great confidence. She has taken quick action on the report and has implemented it in full. She is conscious of the effect of insurance costs on everyone.
Insurance costs can be reduced in many ways. The number of accidents can be reduced, which is why the action taken by the Minister for Transport has been so effective. Some people advocate a levy or special tax on fuel that would go towards reducing the cost of motor insurance for young people in particular. It is one of the most pressing issues facing this and previous Governments. However, it was not resolved by any previous Administration. It has been debated at numerous Ógra Fianna Fáil and Young Fine Gael conferences. Nobody has come up with a magic formula.
I also welcome the Minister of State. He is very busy and is spending more time here than in the Lower House. He is acting in substitution up for all sorts of Ministers, including the Tánaiste. I compliment Senators and O'Toole on their motion and I compliment Senator Leyden for his initiative in proposing the amendment. I agree with Senators Ross and O'Toole that there is no need for division in the House.
I congratulate Senator O'Toole. It is wonderful that one of our own has been appointed to the Personal Injuries Assessment Board to which he will bring a wealth of experience. He has done a wonderful job in other review groups. I fought against the exclusion of politicians from boards because there are many in the Oireachtas with specialist expertise. Senator O'Toole is a case in point. He cuts through the waffle and self-serving antics of the vested interests and cartels that we all want to see disturbed. He mentioned the book of quantum; crude as it might seem, Robert Pierse, the eminent Listowel solicitor, produced such a book a few years back.
The motion is timely and touches on a most pressing need because high insurance costs impinge on many in the workforce. Unfortunately, statistics for injuries and fatalities are appalling, although figures have declined recently. There are many contributory factors – excessive speed, not wearing a seat belt and drink driving, among others. Young drivers are very vulnerable and their insurance costs are huge. Anything that can reduce them should be welcomed.
There is no doubt this is linked to the lifestyle of young males and peer pressure. Dr. Ray Fuller of Trinity College Dublin examined the psychology of the young driver. In his report, Human Factors Related to Speeding, he wrote of a high risk driving style and an overestimation of the ability to drive safely. Young drivers are not good at reading the road for hazards in the distance. Statistics bear out they are more prone to accidents than any other group.
The crucial issue of reducing motor insurance premiums for young drivers was examined in some detail in the Deloitte & Touche report, An Economic Evaluation of Insurance Costs in Ireland. It found that premium rates for them are high in all EU countries relative to the rates charged to more mature drivers, reflecting the significantly higher risk they represent to the insurance companies providing cover. The consultants found that the average cost of an insurance claim for a 17 to 24 year old driver was over twice that for the 36 to 40 year age group and that motorists in the 17 to 24 year age group were responsible for over three and a half times the average claim costs of motorists in the 36 to 40 age group.
The report considered spreading premium rates more evenly across the different risk categories of motorists and concluded that reducing the premiums for young motorists at the expense of increasing premiums for the more mature and safer motorist would reduce the incentive to drive safely. It concluded that the solution to lowering premiums for young drivers was to improve their driving standards and accident claim records.
The introduction of the penalty points system has improved matters. It is hoped yesterday's damaging leak will not cause any setbacks because we have already seen signs of improvement. There will be 60 or 70 more people enjoying the St. Patrick's Day festivities this year than would otherwise be the case.
Senator Leyden mentioned the work of the Joint Committee on Enterprise and Small Business. I am honoured to be a member of that committee and know it is concerned about this matter. It has been considering the Government's programme of reforms for the insurance market. Matters are moving slowly but I hope there will be more of an impetus as result of this motion.
The committee is concerned about some of the key issues: the link between the rating of premiums and claim costs for young people; the greater frequency and cost of accidents caused by young drivers; the impact of premium costs on all drivers; concerns that young drivers are paying higher premiums because of the sins of the few and that young female drivers, in particular, are subsidising other age groups; international comparison of premium and claim costs, particularly the lower cost of insurance in Britain and the checks and balances there for road safety and claim processing.
I welcome the Minister of State back to the House. He has had a rough couple of days here – we should make him an honorary Senator for the amount of time he has spent in the House. With this motion he is back on home ground, dealing with a most important topic. I welcome the motion and I am glad there is agreement on the amendment. Given the challenge that faces us in reintroducing a degree of normality to the insurance industry, we must show unity in this area.
I am disappointed that there was no mention of the effects of insurance costs on small businesses. It is easy to be dismissive of the reasons behind these costs but we must acknowledge that the changed world market has dictated huge increases.
The issue of young drivers is before us. There were problems in this sector before the changes in the insurance market. The increases of the last two years might have been far greater than in the previous two years but even before 11 September 2001 the issue was widely discussed. As a parent of two young sons who are car drivers, I certainly share these concerns, given that parents normally have to pick up the costs. We also have to recognise the actuarial figures placed before us and the way in which the insurance industry has operated in terms of pooling people, and even professions, as being in a high risk category. In the case of medical insurance, there is a far greater spread of insurance costs throughout the entire field of those insured, whereas there has been a somewhat selective approach by the motor insurance industry.
In relation to the motion before the House, I also share the concerns of young people. We have to recognise that in present day society a car is no longer a luxury but rather a necessity for many, having regard to travel to employment and even educational centres. Many third level students are driving to college each day. That is not necessarily a luxury but a response to accommodation costs. I know many families which have made a conscious decision that it is cheaper for them to invest in transport for their children between home and college, rather than having to bear the accommodation costs of living away from home. Those are some of the realities of life today. We need to get away from the idea that it is a luxury for young people to drive. It is becoming a necessity for the reasons I have outlined.
The Government set about a task in the programme for Government in recognising the difficulties in the insurance industry and made it very clear that reform was needed. In bringing forward reform one cannot confine it to a single approach. A number of actions are necessary to bring about proper reform, some of which have been mentioned by previous speakers. In An Agreed Programme for Government it was acknowledged that the MIAB action plan, with its 67 recommendations, would be implemented. Other speakers have commented on Senator O'Toole's appointment to the PIAB and I share their views. It was one of those boards from which we chose not to ban the appointment of Members of the Oireachtas, whereas we have taken a different approach to others. I welcome his appointment and believe he will bring the same energy to the position as he does to debates in this House.
With regard to the Competition Authority, it is necessary – I heard Senator Ross's comments – to examine the whole area of competition. In relation to the Senator's comments to the effect that there would be more reports, findings and sub-committees, that has not been the approach since we set about this reform. The action which has taken place between October of last year, when the Tánaiste's initiatives were brought forward, to its implementation in the earlier part of this year, shows the urgency the Government has placed on this, including the adoption of reports as they come through. However, we must avoid the danger of getting bogged down in reports.
We also have to consider the role of the legal profession in driving costs so high, particularly in areas of undisputed liability. It is incredible that in such cases we still have to go through an elaborate legal process. Undoubtedly, that is a major factor in driving costs through the roof. My point is that a number of different approaches to the situation are required. The Government has set about these approaches in the correct manner. Legal reform is essential and there must be compensation boards where awards can be made without any issue of liability. The awards must be in keeping with common standards, particularly in the courts. I am confident the approach being adopted by the Government will bring about major reform and a reduction in costs. We are getting a positive response from the insurance industry. However, we must not rule out any one element of the tasks taken on by the Government, each one of which has a role to play in terms of leading to a more balanced insurance industry and better value for the consumer.
I approach this debate from a rather different angle from that of other speakers. I have been directly affected by this issue since I started driving some seven years ago. The discriminatory practices rampant in the insurance industry over several years are no surprise to anybody at the receiving end. Ms Dorothea Dowling, the author of that splendid report from the Motor Insurance Advisory Board, confirmed what we already knew. As Senator Ross eloquently pointed out, young people were not even being quoted in many cases and in others the quotations were preconditioned in terms of a number of years driving experience with a no claims bonus. How can a young driver seeking a first quote possibly satisfy a precondition requiring three or four years accident free driving experience? Clearly, there were many issues involved.
When the board was established, it was regrettable that the Minister of State concerned at the time, Deputy Treacy, did not place it on a statutory basis. Consequently, witnesses were not compelled to attend and give evidence. In the absence of the insurance companies from that forum, the board still delivered a very detailed and wide ranging report. Not surprisingly, when the 67 recommendations were made public, the insurance companies raised their heads above the parapet and criticised various aspects. If they had such concerns, why did they not think it worthwhile to participate when invited to do so by the State?
As Senator Minihan has rightly stated, third level students are driving cars to and from college to avoid the costs associated with living away from home. In rural areas, in particular, the use of a car is an absolute necessity. As motor insurance is a legal requirement, insurance companies were taking advantage of young people and abusing them by quoting absolutely exorbitant insurance premiums. It was most unfair that that situation continued for so long. One effect was that young people were buying cars valued, in many cases, at a fraction of the cost of the insurance premiums, thereby giving rise to serious implications in terms cheap cars of a very poor standard, with consequent road safety hazards. That is an unthinkable effect of excessively high insurance costs.
When the report emerged last April, one had to be impressed by all of its 67 recommendations. At the time one of the fears was that it would be left to lie on the shelf, as in the case of many other reports. Fortunately, that has not been the case but implementation has not been fast enough. We must bring an end to the absolutely blatant discrimination which young people have experienced in relation to motor insurance costs.
In its report the MIAB identified three main vested interests in the motor insurance sector which had contributed to the outlandish premiums being quoted and charged to young people. The first comprised those involved in the business to make a profit. The second included those involved in litigation, the cost of which increased compensation claims by 40% which could be directly attributed to those involved in the litigation process. It is clear, therefore, that the status quo was benefiting those involved in litigation significantly. The third was the Government which was receiving the 2% levy by way of stamp duty on premiums.
There are other sectors affected such as the small business sector, about which our colleague, Senator White, could tell us. Anyone involved in small business will tell one about the crippling costs of insurance such as public liability insurance which are forcing people out of business. It is time for us to arrest this trend.
This was a major issue at the time of the general election. Any of us who stood for election received many representations from small business people forced to shed jobs and tell workers that if the situation continued, he or she would not have a job for them. The insurance sector, in its entirety, was introducing prices way above and beyond the means of those being asked to pay. That was deplorable.
In setting up the Personal Injuries Assessment Board the Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Harney, made a very wise choice in selecting as chairperson Ms Dorothea Dowling, chairperson of the Motor Insurance Advisory Board. With her expertise and forensic analytical mind, I am sure the board will be as successful as the one she chaired in a previous incarnation.
Insurance companies are unconscionable. They do not realise, or certainly do not want to be made aware of, the hardship they are imposing, on young males in particular. I recall that when I first started driving, there was a certain policy available for women. At that stage the policy for an 18 year old female with a full licence included a large deduction not available to a male in similar circumstances because it was presumed that women were safer drivers than men. When Ms Dowling went looking for this information, it was not forthcoming. The insurance companies stated they were the statistics. When asked to show the figures which had led them to that conclusion, they could not do so. One would have to draw the logical conclusion that the assumption was unfounded.
The problems faced by the board in its deliberation were far-reaching. Seeking the co-operation of the insurance industry was like "pulling teeth," to quote Ms Dowling. That is deplorable. Any sector behaving in such a manner leaves much to be desired. It is disgraceful the way in which the young male has been victimised and penalised by insurance companies.
At some stage in the process to sort out this horrendous discriminatory behaviour in the insurance sector the young people, young males in particular, who have paid above and beyond what by any stretch of the imagination would be regarded as affordable insurance premia should receive a rebate. It is disgraceful to hear the figures called out by Senator Ross. Some insurance companies were not quoting while others were quoting premiums of €6,000 or €7,000. It is a scandal. It is a bad lookout for any civilised form of democracy.
I am grateful to the Independent Senators for tabling this motion because I had intended to raise this issue the next time the Labour Party had use of Private Members' time. I was disappointed to see a Government amendment but thankfully it has been clarified, through consultation, with the proposer and seconder of the motion.
I accept that there are difficulties with regard to young drivers seeking motor insurance. Like most public representatives, I receive a constant stream of representations from young people who are seeking motor insurance and having difficulties in obtaining a reasonable quotation, or in some cases receiving a quotation at all. Unfortunately, there are difficulties across all areas of insurance, from motor insurance to employers' liability insurance and public liability insurance. Increased insurance costs now constitute a major threat to the existence of some companies and have serious ramifications for the economy in general.
Many reasons, both domestic and international, have been brought forward by the insurance industry for the increases in insurance premiums. These include the number of accidents, the cost of settling claims, the requirement to strengthen insurance reserves, lower investment returns and the impact of the 11 September 2001 attacks in the United States.
Extensive studies have been done over several years of the cost of insurance here, notably that done recently by the Motor Insurance Advisory Board, report of which was published in April last year. There is general acceptance of the analysis, conclusions and recommendations contained in the report. Following its publication, a high level implementation group was set up and mandated to draw up an action plan for the implementation of the 67 recommendations contained in it. It is the most comprehensive study and analysis of the motor insurance industry ever undertaken and provides a sound basis for addressing the problems we are experiencing in the industry. The analysis, conclusions and recommendations extend to other areas of liability insurance also. The report contains 67 recommendations covering a broad spectrum of activities which impact on the insurance market.
This was the first Motor Insurance Advisory Board to secure access to insurers' raw data on premium income and claims costs, on which detailed analyses are presented in the report. It pulled no punches in contending that vested interests and inefficiencies may have collectively accounted for as much as half the premium paid by law-abiding motorists. It further confirmed that the cost of insurance was determined by three main factors: accidents, in terms of both their frequency and severity; the cost of claims within the current compensation system, and the operation of the insurance market. All of these factors have to be tackled in order to achieve better value for money for policyholders. While there is clearly room for further improvement in our safety record, significant progress has already been made, particularly since the introduction by the Minister for Transport of a penalty points system for speeding offences.
The following are some of the major findings in the report: motor insurance premiums in Ireland comprise 1.6% of GDP; litigation costs – legal and expert fees – add 40% to every €1 paid in compensation for injuries sustained in motor accidents; young male drivers, aged 17 to 20 years, on provisional licences produce very substantial insurance losses – they are involved in many accidents, resulting in the most serious of claims at a frequency disproportionate to their representation as policyholders; charges for young female policyholders are not justified by their claims costs – such policyholders have been described by insurers as "subsidisers"; the consequences of uninsured driving are becoming more acute, with the Motor Insurance Bureau of Ireland estimating that they add 8% annually to the cost of claims in the aggregate motor insurance market; the market for private motor insurance is not competitive, a situation compounded by the fact that motor insurance is compulsory, thereby limiting the usual market forces dictated by consumers – the level of mergers reduced 17 separate motor insurers in 1993 to just five in 2001, some of which operate under various product images, without the identity of the insurer being apparent to consumers; and vested interests and inefficiencies may collectively account for as much as half the premium paid by the law-abiding motorist.
The Government considered the report and provided for the establishment of a group to advance implementation of the recommendations contained in it. The group comprised senior personnel from the responsible Departments and representatives of IBEC and the Consumers Association of Ireland as well as the chairman of the Motor Insurance Advisory Board. The group drew up an action plan that specified the measures needed to give effect to the recommendations and set out a target time frame in respect of each of them. The plan provides a precise road map for their implementation. It identifies the stakeholder responsible for delivery of each recommendation and includes a statement of the time frame for implementation. Most importantly, it provides a projection of the expected impact on claims and other costs.
An Agreed Programme for Government contains a comprehensive set of commitments aimed at tackling the high costs of insurance, particularly motor insurance but also other types of liability cover. These include measures to improve road safety and driver behaviour, reduce the legal cost of accident claims and make the insurance market more consumer-friendly. The emphasis is on a co-ordinated set of actions across a range of Departments.
On 25 October last the Tánaiste announced the programme for fundamental insurance reform. The programme reflects the commitments given in An Agreed Programme for Government and comprises a comprehensive set of inter-related measures designed to improve the functioning of the insurance market. Key measures include: establishment of a ministerial committee chaired by the Tánaiste to oversee implementation of the reform programme, including the 67 recommendations in the MIAB report; publication of the action plan to give effect to its recommendations within a target time frame; the establishment of the Personal Injuries Assessment Board, PIAB, on an interim basis pending preparation of the necessary legislation to place it on a statutory footing; and publication of the report of the implementation group on the PIAB.
Insurance reform is regarded by the Tánaiste as her number one political priority and she is ensuring progress is being made on the various elements of her reform programme. The ministerial committee overseeing implementation of the programme, chaired by the Tánaiste and including the Minister for Justice, Equality and Law Reform and the Minister for Transport, has held a number of meetings and discussed the progress being made.
The action plan on the implementation of the MIAB recommendations was published last October. A number of the recommendations have already been implemented. The Motor Insurance Regulations 2002 deal with a minimum period of notice for renewing motor insurance policies and the format of the no-claims bonus certificate. New rules governing advertising by solicitors in relation to personal injuries, for example "no foal, no fee" advertising, have been introduced. The Irish Insurance Federation has implemented or is in the process of implementing through codes of practice a number of other recommendations relating to such matters as giving reasons in writing for refusing a quotation, recognising the driving experience of retired drivers who have a record on their employers' fleets, rating policies based on accident free driving rather than risks based solely on age and desisting from the practise of requiring collateral insurance business to be placed with the company before supplying a motor quotation. The IIF is also in discussions with IBEC about claims settlement guidelines. Progress on the implementation of the other recommendations is continuing.
The report of the implementation group on the establishment of the PIAB was also published last October. Appointments to the positions of chairman and ordinary members of the interim PIAB were made in November. The interim board includes representatives of the relevant stakeholders, ICTU, IBEC and the IIF, plus a number of nominees with relevant expertise. I wish Senator O'Toole well in his role as a member of the PIAB. I know that due to his experience he will do an excellent job.
The chairman has engaged in an intensive round of bilateral contacts with members of the interim board. These bilateral meetings have covered matters relating to the future work of the board and fundamentals of particular concern to the relevant stakeholders. Discussions have also commenced among members of the board in relation to the future ongoing monitoring of delivery costs of compensation in the PIAB system. At a recent meeting of the board a number of items were discussed and agreement was reached on their advancement. Outline procedures for the PIAB have been agreed and work on the production of a book of quantum has commenced. Agreement on initial drafting of legislation to place the PIAB on a statutory footing was also reached. The work being done by the board is necessary and needs to be done in a thorough manner in order that the PIAB can hit the ground running as soon as it is established on a statutory basis.
The PIAB is not designed to reduce levels of compensation but rather to bring about reductions in the cost of delivering that compensation. For 2000 the MIAB report indicated that for motor third party personal injury claims, non-compensation costs as a percentage of compensation costs amounted to 39.5%, while in the case of employer's liability they were 45.9% and for public liability, 56.4%. These levels are clearly not sustainable and the objective of the PIAB is to reduce them. This will reduce insurance costs while hugely benefiting the policyholder.
As indicated, action is required in a number of areas and across a number of Departments. For example, the establishment of the PIAB must be accompanied by improvements in court procedures. The Tánaiste is, therefore, working closely with the Ministers for Justice, Equality and Law Reform and Transport to ensure we move forward with a series of co-ordinated actions. The objective is to ensure a fair and efficient compensation system that in no way penalises the victims of accidents.
In parallel with the reform programme, my Department, in conjunction with the Competition Authority, is undertaking a study of competition in the insurance marketplace with particular reference to motor, employers' liability and public liability insurance. A public consultation process took place prior to the finalisation of the terms of reference for the study. The scope and terms of reference are: to identify anti-competitive practices or other constraints on competition in the non-life insurance market in Ireland, with particular reference to motor, employers' liability and public liability insurance; to highlight any anti-competitive practices or other constraints particular to the Irish market; to make recommendations to ensure competition works well for consumers; and in the case of problems identified at EU level, to make recommendations for change at that level.
Considerable preparatory work in relation to the study has been done. Tender documents in relation to necessary consultancy reports on the insurance industry, the insurance market and statistical and econometrical analysis have been issued as part of this work. It is envisaged that the bulk of it will be completed this year and that a report will be produced in the early part of 2004. This study should give us access to accurate information in respect of the insurance market. The reforms being introduced should bring new players into the market, thereby introducing more competition.
With the establishment of the IFSRA we are moving into a new era of financial regulation. There will be an effective mechanism to balance the legitimate concerns of consumers with requirements for effective solvency supervision. The legislation charges the IFSRA as a whole – its board, statutory officers, senior management and jobholders – to take consumer issues into consideration. We will also see increased dissemination of information of interest to the consumer in making a choice on purchasing insurance products.
The actions I have outlined constitute a comprehensive approach to addressing problems that have developed during the years in the insurance market. The intention is to pursue them with vigour and look for a similar commitment from other actors in the market. While EU law precludes the imposition of price controls on insurance, the Tánaiste has made it clear that she expects a quid pro quo from the insurance industry in the form of reduced premiums. The insurance industry's response will be carefully monitored. The acid test will be in the impact felt in the consumer's pocket.
In this regard, it is heartening to note the recent reported comments from a number of the major motor insurers that further increases in premiums may not be necessary at present and, in one case, that they have already reduced premiums since the beginning of the year. As implementations of the measures contained in the reform programme continue, it is expected that this trend will continue.
I welcome the Minister of State back to the House. I am sure when he writes his memoirs in years to come, he will acknowledge that 11 and 12 March 2003 were his toughest days in this House. Allied with support of this motion, I call on the Minister to appoint immediately an insurance ombudsman to control the increasingly out of control nature of the motor insurance industry.
Young drivers and their parents – who in many cases foot the bill – are at the mercy of companies who deliberately inflate prices for certain categories. Young drivers are unfortunately at the top of these categories. Though all motorists are being held to ransom and caught in the stranglehold of compulsory insurance, the problem is intensified for the young driver. Some insurance companies have a fixed discount per year for accident-free young drivers who drive under their parents' policies. While there is no structured approach to this procedure at present, it could come under the remit of a specially appointed ombudsman. Monitoring by a statutory insurance ombudsman would spread the burden of risk of insuring young drivers across more insurance companies and help reduce the cost of insurance for young people. Currently, companies who quote for young people are so few that the risks they face result in higher insurance rates.
Unfortunately, the high level of claims, due to increased accident rates and the numbers of uninsured drivers on our roads, is a contributing factor in insurance price increases. Without an independent regulator, the insurance companies are placing intolerable demands on our motorists, particularly young drivers. While the points system is a welcome addition to help enforce road safety standards, penalties for uninsured drivers – of any age – should entail confiscation of the vehicle, with the proceeds given to the Motor Insurance Bureau of Ireland, the agency that pays the claims against uninsured drivers.
I believe that if the Minister for Justice, Equality and Law Reform is serious about addressing the issue of safety on our roads, he will bring in penalties such as a seven year ban for having no insurance and a life-time ban for persistent offenders. It is an inescapable fact that young drivers have an accident record which is twice the national average. One person is killed every 19 hours on our roads and one person is injured every 40 minutes. Young people make up a high proportion of those killed and injured. In 2000, the number killed in road accidents per 100,000 of the population was higher for 18 to 24 year olds than for any other age cohort, and higher again among males.
What is the cause and what is the remedy? The cause, as I see it, is the lack of education and the remedy is education. Driving tests are providing an admirable check but more is needed for young drivers. That extra responsibility should lie with our schools. Take the example of the United States where driving at 16 years is the norm. While there in January, I visited schools where driving instruction is a compulsory credit course for all students. We are ideally set up to follow this example given the structure of our secondary schools with what amounts to a gap year between junior and senior cycles. A compulsory driving module should be built into all transition year courses with driving regarded as an essential life skill. If young people were to finish transition year equipped with theoretical and practical driving skills allied to a certain degree of car maintenance knowledge, the profile of our young drivers would change. Safety standards would rise and, dare I say, our insurance companies might even court their business. Age is not necessarily the problem but mature and responsible attitudes to driving need to be fostered. A systematic approach to the quality and experience of young drivers must be put in place.
The present cycle of insurance being weighed to reflect the negative image of the young driver must be broken. The obvious way to break this image is to equip them with the necessary skills and by protecting their rights through recourse to an independent insurance regulator. I believe it is necessary to establish an insurance ombudsman, not just for young drivers but for all.
I join other Senators in welcoming the Minister on one of his ever more frequent visits to the House. In my short time in the House, I have made an effort to speak on the serious issue of rising costs for businesses and consumers. I welcome the opportunity to discuss another facet of this issue – inflated insurance costs.
Without doubt, a major concern for consumers and businesses alike has been the steady rise in insurance costs over the past ten years. Motor insurance is particularly expensive, not only when compared to European prices but worldwide. A recent report by the Department of Trade, Enterprise and Employment, shows that Irish consumers pay a higher percentage of their earnings on motor insurance than people in any other country in the world. I note that the Government has taken decisive steps in improve this situation.
The primary focus should be to develop a pragmatic and workable system to handle insurance claims for the benefit of the claimant and policyholders in general. However, there should be greater transparency in the pricing of this insurance and a guarantee that certain sectors of the population will no longer be discriminated against on the basis of age.
Young drivers have long been the victims of crippling insurance premiums. The insurance industry claims that a major reason for the disparity in pricing between young people and older drivers is that the former have a poorer claims record than any other category of driver. These assertions may have some validity. In the NRA report of 2000, it was stated that 25% of all injury accidents reported to the Garda involved at least one young driver. Furthermore, accidents involving young drivers tended to be more severe, thereby producing higher claims from affected parties. Compared to older drivers, young drivers are deemed to be responsible for a higher proportion of the fatal/injury accidents. Young drivers account, on average, for nearly 40% of all car drivers killed and a quarter of all injuries sustained. These are high statistics considering that the category accounts for less than 10% of all road-users.
In this light, it is understandable that premiums are weighed against this particular group of drivers. Having said that, however, it is equally understandable that there is such general disgust at a policy that obviously discriminates on the basis of age alone. It is completely unfair to tar all young people with the same costly brush. Not every 28 year old is a menace behind the wheel. Similarly, not everyone over 28 is a naturally gifted, accident-free driver. This is exactly the generalisation that ensures young drivers – it is slightly cheaper for young female drivers – on the whole pay much more than twice the average car insurance premiums.
What can be done to right these obvious inequalities? As a possible way of diverting attention from this disparity, the insurance companies have provided a list of specific actions that could be taken to address claims issues particularly relevant to young drivers. The IIF argues that better driving habits and greater safety awareness leading to fewer accidents and therefore fewer claims are essential to reducing the cost of motor insurance for young drivers.
It is suggested that as legal costs make up a significant part of insurance costs, any initiative to streamline the legal system, for example by introducing specific personal injury courts and better pre-trial procedures, would also lead to reduced premiums. Furthermore, there has been a general call from insurance companies for tougher road traffic legislation and stronger powers for the Garda in enforcing legislation and in dealing with any offences.
However, if such initiatives were carried through, can we truly believe that insurance companies would reduce costs to younger drivers? Such policies are already in place, yet the cost of insurance for young drivers continues to rise. We have recently seen the introduction of the penalty points system, which is having a huge effect in reducing road fatalities, and thus reducing the number of accidents by an even more significant number.
It is obvious that all drivers have slowed down and become more cautious since the penalty points system was introduced. Yet we have seen zero action from the insurance companies in reducing the costs to young drivers. The reason is clear. The insurance companies have recognised that rather than being a burden on their profits, younger drivers are their cash cow, earning them over €200 per head on drivers aged between 22 and 24. This is completely unacceptable, and I condemn the greed and irresponsibility of the insurance companies for their chronic failure in this regard.
For anyone who had any doubt, the recently-released report of the Motor Insurance Advisory Board showed that motor insurance companies, far from losing money, are highly profitable. They may continue to divert attention from themselves, and place the onus on this Government, or on drivers. They may even tell us that 11 September 2001 is to blame, but as any Senator who has been to New York will agree, it is difficult to find Irish-registered young drivers driving on that city's streets.
The onus is now on the insurance companies to take action to solve this problem. Young drivers can no longer be discriminated against in such a blatant and unacceptable manner. We have a responsibility as legislators to ensure that all our citizens, and particularly our young citizens, have a fair opportunity to use our roads and have adequate insurance at affordable prices.
I congratulate my colleague, Senator Ross, on putting down this important motion. In terms of young drivers – regrettably I can no longer qualify as one myself – there is a great problem because of the enormous costs involved. They are really quite bizarre. I know that the insurance industry is based on the calculation of actuarial risk, and if certain categories of drivers have a demonstrably greater accident rate, it is perfectly legitimate to penalise them. The insurance companies have signally failed to demonstrate in the case of young drivers that this is the situation.
It is important that we have the figures and can properly determine the risk. I do not believe the youth of drivers is the risk factor. These bizarrely high rates act as a disincentive to young people to get insured at all, a much worse situation. A large number of young people are driving around the countryside without insurance, and that exposes the public as well as the individual driver to danger. That is very much to be regretted.
I am a little surprised that the Government proposes to amend this motion. To me it is unarguable. The only thing it does not do is praise the Government for all the wonderful things it has done. It would be a pity if we get into this knee-jerk situation where, any time a non-contentious motion is put down by people such as Independent Members, the Government feels the absolute necessity of praising the Minister for matters already dealt with.
A couple of weeks ago, the penalty points issue came up in this House and praise was heaped on the Minister by the Government side. Why do it again? It is not necessary. Senator Ross cleverly and appropriately focused on young drivers. Why drag in remarks about penalty points and the decline in fatalities, etc.? No one has any argument with all this, but it is not directly relevant.
I would agree with the proposal that we "commend the initiative which the Tánaiste has undertaken with the Competition Authority on a study of competition in the provision of non-life insurance". That is important. The Competition Authority is one of the best bodies established in this country. I am not sure if it was this Government which set it up, but if so, I am sure the Members will pile praise on themselves. Whoever was responsible, it was a good thing. We need a bit more—
Splendid. What a brilliant political intellect I have. Self-praise is catching. The part I wanted to object to involved 11 September 2001. I have to say, a Leas-Cathaoirligh, this House is showing an increase in common sense over the past 24 hours that is quite remarkable. I congratulate the Members on what Chairman Mao would have called their Great Leap Forward. I believe insurance companies are involved in a whole series of scams. They are massaging the situation, and using 11 September 2001 as an excuse for everything. Rather than aiding and abetting the insurance companies, we should be hammering them over it.
We should say this is not justification. Why the hell should I pay for 11 September 2001? I do not believe it is a valid excuse.
I want to make one parochial point, though the late Frank O'Connor did ask what was wrong with parochial, because if one knew one's own back yard one knew everyone else's. I would like to tell the House what is happening in my back yard, or in my automobile. My nice tinny Toyota in which I used to skid around Dublin at 85 miles an hour, on the inside of old ladies, blowing the horn, waving my fists and shouting obscenities – exploded. I had to trade it in. I got a wonderful Jaguar motorcar for €5,000 and I have noticed a change in my personality. I have now become the Queen Mother. I am very happy to drive at 30 miles per hour. It does not bother me.
The problem relates to what I said at the outset, that I have no argument with any insurance equation that is the result of an actuarial calculation. There is risk. The insurance company insures you against a particular kind of risk. My motorcar is a very beautiful instrument, but its market value is only about €5,000 or €6,000, thanks to the snobbery of the Irish motorist, who does not want a second-hand car, as well as to the high cost of maintaining and running it. The insurance on it is third party, fire and theft only, so the insurance company cannot claim that the enormous cost of the insurance is because of the replacement value of the parts, because I will have to pay for them regardless. In a larger car I am driving at a slower rate, so I am probably a much safer motorist. For becoming a safer motorist in a cheaper car, I am charged about five times the premium. That is mad.
What we should be doing, in terms of the investigation established by the Tánaiste, is looking at how the premium is calculated. It should relate to what the insurance company might have to pay out in certain circumstances. No matter what damage I do, the insurance company has much less exposure. However, its gets away with charging me nearly €2,000 for the privilege of insuring my car.
I congratulate Senator Ross on tabling this important motion. I have no doubt it will be popular among the young voters in Trinity College. He is quite right to consider that fact, particularly as we are here to represent different sections of the population. We should use this debate to ensure that the insurance industry is reasonable and fair in its calculations for motor insurance and that young customers, in particular, get value for money without exclusions and loadings that do not bear any relationship to what insurance companies are obliged to pay out. I am pleased to learn that there is an excellent degree of co-operation in the House.
At the first Ógra Fianna Fáil conference I attended in 1994, one of the issues on the agenda was how to reduce the cost of insurance for young drivers. It has also been a matter of discussion at every subsequent Ógra conference or meeting of young people.
The reduction of deaths and accidents on the roads is particularly noticeable in the four months since the Minister for Transport introduced the penalty points system. Those accidents and the costs involved account for the high cost insurance. The large number of young drivers affected by accidents is a sad reality. Horrific television advertisements illustrate the types of injuries suffered by people who survive motor accidents. Thankfully, their lives have been spared but they may be confined to wheelchairs or live in a vegetative state for the rest of their lives. The lives of young people, their parents, families and friends are ruined as a result of car accidents.
While it is important to reduce the cost of car insurance, we should broaden the debate and concentrate on how we can make it safer for young people, pedestrians, older people or the Queen Mother – who might be driving around Dublin in his new Jaguar – to use the roads. We must create an environment where it is safer to use the roads. Education is the principle method of achieving this. We should begin the education process for young people from their first year in secondary school. When I was much younger, the first thing I wanted to do when I was 17 was get my provisional licence. The next was to pass my test, which I did within six months of obtaining my licence. That does not happen anymore.
While I recognise the efforts that are being made by the Minister for Transport in the area of provisional licences, it is important that we build the notion of responsibility into our school curriculum. When my father allowed me to drive the car on my own for the first time after I had passed my test, he told me he was giving me a weapon with which I could kill someone if I did not use it responsibly. That is a message we need to get across to people, particularly the young.
Many people try to be like Formula One drivers. Even at 17 years of age, I drove around as fast as I could when trying to get from A to B – bettering my friends and racing and chasing around the place. We need to educate young people because they do not have experience. I did not have experience when I was young and it has taken many years to realise I had been a danger to myself, other people in the car and those into whose vehicles I might have crashed. I advocate safer motoring for everybody, not just to reduce the cost of accidents but to protect the lives of young people and those who walk along country roads at night because of the lack of public transport. One must also consider the families of people who suffer brain or spinal injuries in accidents because they must care for the latter at a time when they should be retiring and looking forward to a better life.
We need to be more vigilant in relation to the effects of the penalty points system. After the initial furore about the system, traffic speeded up again. It has been noticeably slower in the past few days because of heightened publicity following the Garda report and discussions with the Minister. We need to hammer home the message that speeding kills, time and again. If you speed, you will be caught and penalty points will be applied. That is what is frightening motorists and encouraging them to slow down.
Some 64% of the money from claims under €15,000 was paid out to solicitors and experts. That means people who are being paid compensation for accidents are not even getting the full benefit. The money is going to solicitors and the medical people who advise them and attend at the High Court to act as witnesses. That is not right and we need to do something to address it.
Senator O'Toole made some good points which are obviously informed by his membership of the Personal Injuries Assessment Board. If someone has been injured in an accident, through no fault of their own, and if they are entitled to compensation, we must give it to them in a fair and equitable manner. We cannot have a situation where we have fraudulent and excessive claims where the only people who benefit are lawyers and doctors.
On this morning's "Today with Pat Kenny" radio programme, a listener called to say that, for the first time in ten years, the cost of his motor insurance premium had fallen. We may be seeing a general reduction. I agree with the sentiments expressed in this motion. There is an urgent need to do something and to continue to put pressure on the insurance companies. We cannot accept the codswallop that has been floated about 11 September 2001 and global uncertainty. It is the greatest load of rubbish I have ever heard. I suggest that we give young people something to value, such as a 70% no claims bonus for their first year driving. It will influence their attitude because, if they have something of value, they will not want to lose it. If they know that the difference between their insurance one year and the next will be €3,000 or €4,000, they will be more likely to be responsible in their actions.
The tardiness with which the report of the MIAB was first accepted and then published was disgraceful. I have never figured out the reason the Government took so long to get and then publish it. Nor do I understand the reason it is taking so long to implement. It was particularly damning. The great thing about actuaries and actuarial studies is, depending on the assumptions drawn, one can prove whatever one wishes. Much of it relates to medium and long-term assumptions about rates of depreciation and other matters. It demolished much of this once and for all.
It is important to remember that the occasional large award to a tragic individual who has been paralysed does not drive up the cost of motor insurance. The cost is driven up by comparatively small claims doubled by the enormous fees of the legal profession and, in some cases, those of the medical profession. I am married to a doctor and must be careful about what I say.
Every item of insurance ought to be based on publishable actuarial evidence. If one has a full no-claims bonus and goes three years without holding insurance, for whatever reason, one loses the no-claims bonus. There can be no actuarial or other evidence to justify this. The companies know they have one caught by the "short and curlies" and increase premia accordingly. What evidence could there be to show that those who have achieved a no-claims bonus and cease to drive for three years pose a greater risk than those who have continued to drive?
I am sure the process is full of other matters like this. Insurance has been withdrawn from a skateboarding arena in Cork. While no claims were made against it, after one year in business it could not find a company to give it a quote. This caused 300 or 400 youngsters to lose a venue where they could enjoy themselves and do something in their spare time. This cannot have been based on any actuarial evidence; the companies in question decided it was an unknown quantity and did not want to insure it. This is happening all over the country.
I look forward to the report on the professions of the Competition Authority which I hope is as outspoken in this case as it has been in dealing with travel agents, farmers and other groups. While I am a professional, the mystique of the professions is one of this country's problems. The pretence that it is to our benefit that the Law Society or Bar Council regulates a profession and fixes fees in the process is nonsense. We would be better off if we had a limitless number of law and other professionals based on academic qualifications. The idea that quality can be delivered to society by giving professions control over themselves and their fees is a load of nonsense. As most of those professionals form part of my University constituency, it is evident that I am not playing to a gallery. I was going to talk about numerically challenged actuaries but have decided to leave it out. I did not invent the term "numerically challenged".
There is a fundamental problem about honesty in our society. Each of us can cite prominent figures in society who were generously compensated through insurance claims because their careers had been ended, to which they miraculously returned after the court case had ended. I know this happened in the case of a certain individual. If this is the quality of honesty in our society, is it any surprise that the first thought of many on having an accident is to wonder how they will maximise their compensation? There needs to be a cultural shift by both claimants and professions.
I thank Senator Ryan for sharing time with me and the Independent Senators for tabling this motion. I am glad Government Senators amended the Government amendment and dropped the reference to 11 September 2001. As a younger driver, it is important that I speak on this issue. While I agreed with much of what Senator Leyden said, I disagree with what he said about the speed with which the Tánaiste and Minister for Enterprise, Trade and Employment was acting on the issue. Many speakers, particularly those from the Government parties, have said it has dragged on for years. If it has, why is it only now that the Tánaiste is taking steps to resolve it? This could not be described as swift.
I drove the ten miles to college every morning before I was elected to this House.
That was in the dim and distant past, a Leas-Chathaoirligh, and I have no recollection of it. I had to pay a premium that was a multiple of the value of my car. Other young people also experience this. The premium I paid for my 1.4 litre car that was worth no more than €200 was €2,500. I was not alone in this. There are people with bigger premia for less valuable cars.
I agree with what other speakers have said about the inclusion of education in driving in the school curriculum. This should be done in a more permanent way in second-level schools, perhaps by using transition year. Senator O'Toole has referred to the driving test in this House. It is ridiculous that the test does not encompass overtaking, probably the most dangerous part of driving. It should be reformed to include an overtaking manoeuvre, the source of many accidents.
The standard of roads, a topic which has not been mentioned in this debate, is the cause of many accidents. While we often compare ourselves to other European countries, we do not have comparable roads. In many cases, our national primary routes could be better described as dirt tracks. Nobody ever seems to take that into consideration when discussing this issue.
Competition is another issue. If we are to reduce the cost of premia, we must introduce a reasonable amount of competition in the car insurance industry. I worked for a number of months in an insurance brokerage. I was unable to quote people of my own age or a little older or younger when they rang seeking quotes. When I put their details into the system, I was unable to obtain a quote from the car insurance companies. In 1993, there were 17 insurance companies selling car insurance. By 1999, there were only five. There are probably only three or four now. That situation must be examined. If we are to resolve this problem, we must introduce competition into the market.
I support the motion as amended by the House. This is an important issue that affects everybody. Some Members mentioned that young people are often better drivers that older people. I prefer to drive myself places rather than allowing my father to drive me and I am sure that is the case for many young people.
I have a new car and I pay an insurance premium of €3,200. I have been informed that it will decrease when I am 25, which is not too far away. I hope it will decrease, but it is a crazy amount. It is not fair or equitable that older people, by virtue of the fact that they are older, pay less. I have never had a claim and I have had a full licence for six years. The system is not justifiable. I support the Independent Senators who brought this matter before the House. It is an important issue.
It was a great experience to hear this serious topic debated and I compliment the Senators on bringing the motion before the House. There are three points on which we are in agreement and on which the Minister of State and the Department should take action.
There is serious discrimination against young people by virtue of high insurance premia. As Senator Ross stated, we also agree on the necessity to improve driving standards. Senator Bannon suggested that transition year in school be used to teach young people how to drive and that they should get points for it. That is a creative and innovative idea. I commend it, from a practical point of view, to the Department of Education and Science.
The other important point, in addition to learning to drive properly, is courtesy on the road. There is little courtesy on the roads. People are generally not mannerly and courteous to others when they are driving. If one gives way to a motorist, they generally will not thank one for it. That is frustrating. If they offered acknowledgement, one would do it more frequently. Courtesy is part of learning to drive. Senator Ross made another important point, namely, that young people should not be allowed to have any drink taken when they drive.
These are key practical points in seeking a solution to this serious discrimination. There is consensus on both sides of the House that there is discrimination. It would be interesting to see these practical suggestions implemented. I drove back from the transport conference in Clonmel on Friday.
I never usually drive at night. The markings on the inner margins of the roads were extremely poor. It was about 1 a.m. and when large trucks were coming towards me, I could not see the edge of the road because of the strength of their headlights. The local authorities have a responsibility for this. I do not know how county managers allow anything less than definite road markings in their counties.
I thank the Senators who contributed to the debate. I particularly thank Senator Leyden for coming forward with a constructive suggestion. There was no ambition on the part of Independent Senators to have a row about this. We simply wished to raise the issue, debate it and get some agreement from the Government.
I am not sure that I would have been so agreeable if I had read the Minister of State's speech beforehand. It was, as ministerial speeches to the Seanad always are, a holding statement. In effect, it stated that this happened last April and the Government is going to start examining it now. It then referred to that bête noire of many Members of the House, a high level implementation group.
The Leader is correct. It was mentioned in the first paragraph. A high level implementation group usually means it is full of rather pompous people who will not reach any conclusions. The Minister of State then went on to refer to two of my pet hates, the two words in any speech that drive me mad, namely, IBEC and the ICTU. They were used as a sort of defence for delay and committees. I became somewhat suspicious of the defensive nature of the Minister of State's response.
Nevertheless, there is a genuine desire to tackle this problem, although I doubt that the Government or anybody else knows how to do what they want to do, which is reduce the price of premia. Although there have been many suggestions, eloquent speeches, reports, committees and comments on insurance companies, there is no indication that premia will be reduced. That is the nub of the problem. I suspect that Senator Ryan and others were right. The problem is the insurance companies. It was indicative of somebody's thinking that there was an offensive paragraph in the Government amendment which was, effectively, an apologia for the insurance companies. I am glad that emerged.
We should confront the insurance companies and ask them what they are doing and who is running them. The insurance companies are the biggest cartel. They are a bigger and more menacing cartel in some ways than the banks. They have captive victims. One cannot avoid going to an insurance company and that is the problem. Members are unanimous about wanting to tackle this problem and reduce premia, but the vested interests appear to be delaying the implementation of the necessary measures. Those vested interests appear to be more powerful than the Members of both Houses of the Oireachtas.
There were some good suggestions in the debate. Senator McCarthy's suggestion, that people should get some type of points rebate if they have a clean driving record, whether they are young or old, was excellent. We should look at the insurance companies in a more combative way. As Senator Ryan correctly said, like all professionals they confuse us with jargon. They seem to think that because they talk a language we do not understand, with its embedded values and God knows what else, they are practising some sort of superior science and are, therefore, justified in what they are doing. They are blinding us with that science and we are allowing them to do so when they could easily charge lower premia if they got their houses in order.
Let us consider insurance companies. What is happening with them? They are losing money hand over fist and the message is getting across to people that this is dangerous for the financial system and, therefore, there must be some way that we should subsidise it. The idea is being implanted in consumers' minds that there is a justification for some of the loss-making sections of insurance companies to be subsidised by young drivers. This was reflected in some of the thinking on the Government's amendment, but it is not something we can justify.
We should question these companies who have been dragged kicking into the era of transparency. We should examine the actuarial valuations because actuaries are more fallible than any of us. Anybody who looks at what has happened to actuaries' predictions and assumptions will know that a babe in arms would do better. These people, however, have a sort of pseudo-sophistication which dazzles and confuses us, so we accept what they say. The insurance industry is based on an emperor without too many clothes, and young drivers are suffering as a result.