Seanad debates
Tuesday, 1 December 2015
Commencement Matters
Motor Insurance Coverage
2:30 pm
Paddy Burke (Fine Gael)
Link to this: Individually | In context | Oireachtas source
I welcome the Minister for Transport, Tourism and Sport, Deputy Paschal Donohoe, to the House.
John Kelly (Labour)
Link to this: Individually | In context | Oireachtas source
I welcome the Minister to the House. In the past year or so we have seen many protests about water charges and so on. In some cases people were asked to pay an extra €160 when the conservation grant is taken into account. In some cases the charge was €80. In many cases there was no charge at all. Anyway, we have a bigger problem with charges. The bigger problem is the major increase in car insurance, house insurance and health insurance costs. This year, many of the costs seem to have gone up by 25%, 30%, 50% or 60% for absolutely no reason whatsoever. I know of many examples. I have one example involving house insurance. A man made a claim for an iPad that broke. There was an excess on the policy and all he was able to claim was €150, but his insurance policy went up by €300. When he rang and questioned those responsible, they told him that if he paid back the €150 they would reduce his policy by €300. They seem to be making it up as they go along.
This problem arose in 1984 and, as a result, the Motor Insurance Advisory Board was set up. The board last reported in 2004. At that stage responsibility for those duties was transferred to the Department of Transport, Tourism and Sport. Now, it appears nothing is listed on the Department's website indicating that the Department has any responsibility. There seems to be no monitoring body. Consequently, these companies are showing no loyalty to their customers. Although I advise customers to shop around, it seems to be clear that there is a degree of cartelism operating with all the insurance companies. All of them are guilty of the same thing.
I am calling on the Minister to re-establish the Motor Insurance Advisory Board. I will set out two examples for the Minister. An elderly man telephoned me. He is 73 years of age and drives a 2003 Ford Fiesta. The value of the car is €1,000. He has a 60% no-claims bonus. He is asked to pay €880 per year. A lady was on the telephone to me the other day. Her son drives a small 2002 Audi to bring him to college in Mountbellew every day. The college is not far enough away for him to get accommodation there. Last year his insurance policy was €1,400 on the basis of no claims, no penalty points and the car depreciating all the time. The premium has gone up to €2,648 this year. That is almost a 90% increase for absolutely no good reason. I heard from another young person who told me that cars 13 years or older are particularly targeted by the insurance companies. That is the reason the young man I referred to has had this dramatic increase in his policy.
We put cars through the national car test. Either the result of an NCT is of value or it is not. We have to get clarity on the matter because families are being crippled with these payments.
There is no evidence to suggest that the reason for these hikes in insurance charges is vast payouts. In fact, there is €1 billion in the difference between premium income and the published awards.
My final point relates to the 3% levy that policyholders pay. It is fine for people who are paying €200 or €300 for car insurance. They can get away with €6 or €9 per year extra. However, the young man I made reference to will have to pay an extra €158.88 because of the 3% levy. As well as re-establishing the Motor Insurance Advisory Board, I call on the Minister to introduce a set fee rather than a set percentage.
Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source
I thank Senator Kelly for raising this matter with me today.I should clarify that the Motor Insurance Advisory Board, MIAB, was not originally established by my Department, nor do I have a legal role in that area or the re-establishment of the board. The MIAB was originally established under the Motor Insurance Advisory Board Act 1984, introduced by the then Minister for Industry, Trade, Commerce and Tourism.
My responsibilities, as Minister for Transport, Tourism and Sport, in relation to motor insurance are limited to the requirements under the Road Traffic Acts relating to compulsory insurance for drivers of mechanically-propelled vehicles. To that end, I have responsibility for the current agreement with the Motor Insurance Bureau of Ireland, MIBI. This body was established in 1995, having as its principal role the compensation of victims of road traffic collisions caused by uninsured and unidentified vehicles. It is regulated under the terms of an agreement with me, as Minister for Transport, Tourism and Sport. The most recent such agreement is that of 2009. It is funded by all insurance companies underwriting motor insurance in Ireland, which must by law be members of MIBI and contribute to funding the claim in proportion to their market share.
The area for which I have direct responsibility relates to motor insurance costs and the impact they have on road safety, which is my responsibility. On the broader point the Senator has raised, to which I want to respond, I am aware of the clear trend to which he refers, whereby there have been increases of between one fifth and one third in many premia within the motor insurance market in the last 12 months. The motor insurance industry itself is pointing to a number of factors that are causing this, such as the frequency and scale of claims and the cost of those claims. It is also making some observations about the operation of the insurance market and the particular requirement under the solvency II directive from January of next year for insurance companies to increase their capital reserves, which could be a contributory factor in some of the premia to which the Senator refers.
The Central Bank is the regulatory body in respect of all this, but it is only able to issue directions to firms in respect of where they price, how they operate and whether any decisions they make would risk the sustainability of the company as a going concern and then cause further issues for policy-holders. I have met and engaged with representatives of the insurance industry regarding this matter and I believe the Department of Finance, along with the Central Bank, will be reviewing the circumstances that led up to the issues with Setanta Insurance, which have also been a contributory factor in this matter. They will then report back to the Minister for Finance to see what can be learned from this and whether anything can be implemented to deal with the matters the Senator is referring to.
John Kelly (Labour)
Link to this: Individually | In context | Oireachtas source
When I looked for this Commencement debate, I was looking for the re-establishment of the MIAB. I sent the request to the Department of Transport, Tourism and Sport initially because that is where it ended up once it had been disbanded. When my Commencement debate ended up on his desk, the Minister's Department said it had nothing to do with it. It sent it back to the Seanad Office, which then sent it to the Department of Finance, which said it had nothing to do with it and sent it back to the Department of Transport, Tourism and Sport. Regarding the exact issue I wanted to discuss, namely, the re-establishment of the MIAB, is the Minister saying it was initially established under the Department of Industry and Commerce? If so, maybe that is who I should have had in here, and not the Minister. The Minister said the Central Bank was regulating insurance costs, but it is not. Costs are spiralling out of all control at the moment.
Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source
On the area of responsibility, when I became aware of what was happening I said I would answer the question for the Senator because this matter is best understood relative to what is happening with car insurance, for which I have a responsibility in the context of road safety.
The re-establishment of the MIAB would best sit with either the Department of Finance or the Department of Jobs, Enterprise and Innovation. As I am answering the Senator's question in the House, I will pass this debate we have had on to the Minister for Finance this week, because we are engaging within Government at present on some aspects of what the Senator referred to, and ask the Minister to revert back to the Senator with a response on this point.