Wednesday, 10 July 2019
Department of Finance
Insurance Industry Regulation
At the outset, the Deputy should note that I am responsible for the development of the legal framework governing financial regulation. Neither I nor the Central Bank of Ireland, can interfere in the provision or pricing of insurance products, as these matters are of a commercial nature, and are determined by insurance companies based on an assessment of the risks they are willing to accept. This position is reinforced by the EU framework for insurance which expressly prohibits Member States from adopting rules which require insurance companies to obtain prior approval of the pricing or terms and conditions of insurance products. Consequently, I am not in a position to direct insurance companies as to the price or the level of cover to be provided either to consumers or businesses.
However, I acknowledge the general problems faced by many consumers, businesses, community and voluntary groups, in relation to the cost and availability of insurance. I also appreciate that there is some frustration about the perceived pace of reform. Unfortunately, there is no single policy or legislative “silver bullet” to immediately stem or reverse premium price rises. This is because there are many constraints faced by the Government in trying to address this issue in particular the fact that for constitutional reasons, it cannot direct the courts as to the award levels that should be applied and for legal reasons it cannot direct insurance companies as to the pricing level which they should apply in respect of businesses seeking insurance.
However, I wish to re-emphasise how important this issue is for the Government. The Deputy will be aware that the Cost of Insurance Working Group was established in July 2016 and undertook an examination of the factors contributing to the increasing cost of insurance in order to identify what short, medium and long-term measures could be introduced to help reduce the cost of insurance for consumers and businesses, including hoteliers. As part of this exercise, there has been extensive interaction with interested stakeholders, including the body mentioned in the details supplied, and the insurance industry and its representative bodies.
The Report on the Cost of Motor Insurance was published in January 2017 and makes 33 recommendations with 71 associated actions to be carried out in agreed timeframes, which are set out in an Action Plan. In January 2018, the Working Group also published the Report on the Cost of Employer and Public Liability Insurance. This Report makes a further 15 Recommendations with 29 associated actions. There has been significant work to date in implementing the recommendations of the two reports, including the following:
- the progression of the Judicial Council Bill in order to implement recommendation of the Personal Injuries Commission regarding award levels in this country, including a judicial recalibration of the existing Book of Quantum guidelines;
- the establishment of the National Claims Information Database in the Central Bank to increase transparency around the future cost of private motor insurance;
- reforms to the Personal Injuries Assessment Board through the Personal Injuries Assessment Board (Amendment) Act 2019;
- commencement of the amendments to Sections 8 and 14 of the Civil Liability and Courts Act 2004 to make it easier for businesses and insurers to challenge cases where fraud or exaggeration is suspected;
- the reform of the Insurance Compensation Fund to provide certainty to policyholders and insurers; and,
- various reforms of how fraud is reported to and dealt with by An Garda Síochána, including increased co-ordination with the insurance industry, as well as the recent decision by the Garda Commissioner to develop a divisional focus on insurance fraud which will be guided by the Garda National Economic Crime Bureau (GNECB) which will also train Gardaí all over the country on investigating insurance fraud, and the recent success under Operation Coatee, which targets insurance-related criminality.
I believe that these reforms are having a significant impact with regard to private motor insurance (CSO figures from May 2019 show that the price of motor insurance is now 24.5% lower than the July 2016 peak). The Government is determined to continue working to ensure that these positive pricing trends can be extended to other forms of insurance, including those relevant to businesses.
With regard to the urgency of setting up the Judicial Council, Minister of State D’Arcy has worked closely with the Minister for Justice and Equality, Mr Charlie Flanagan TD to progress the Judicial Council Bill through the Houses of the Oireachtas as a matter of priority. I am therefore pleased that the Bill was passed by both Houses of the Oireachtas on 9 July, and I expect it will be signed into law by the President shortly. Now that the Bill has been passed, it will be a matter for the Judiciary to put in place the Judicial Council and to establish the Personal Injuries Guidelines Committee. While the Government cannot interfere in their deliberations, I would hope that the Judiciary will recognise the importance of this issue and prioritise it accordingly by targeting an end of year completion date for an initial set of guidelines, which take account of the PIC’s benchmarking report.
With regard to a zero tolerance approach to fraud, I believe that one of the key achievements of the CIWG is increased coordination and cooperation between An Garda Síochána and the insurance industry with regard to tackling fraud. This includes the reporting of suspected fraud, as well as to how that fraud is recorded on the PULSE system. In addition, Garda Commissioner Drew Harris has decided for operational reasons to investigate insurance fraud at the divisional level, rather than establish a centralised insurance investigation unit, which may not be in a position to investigate incidents at a local level to the same extent. I understand that this approach is aligned with a general divisional-focused Garda model and that the Garda National Economic Crime Bureau (GNECB) will guide divisions and provide training in the investigation of insurance fraud. I believe it is important to accept the expert view of the Garda Commissioner in this matter and I understand that An Garda Síochána provided further detail on their approach at the Joint Oireachtas Committee for Finance, Public Expenditure and Reform, and Taoiseach on 9 July. I am confident that this marks a key turning point in how insurance fraud will be investigated by An Garda Síochána in the future. There has also been recent success under Operation Coatee, which targets insurance-related criminality.
With regard to the final point made, there have neem a number of measures already introduced that will improve the Irish claims process, such as reform to PI AB, as well as the amendments to Sections 8 and 14 of the Courts and Civil Liability Act 2004. I believe that a key potential outcome of the recalibration of award levels through Judicial Council Guidelines is that there should be lower and more consistent award levels given. If consistency of awards can be applied in a broad sense, particularly for soft tissue injuries, it should have two very significant effects. The first is that there should be less reason for cases to go to litigation, as the level of awards granted by the courts will be aligned with those provided by PIAB; this in turn should mean a reduction in legal costs; and secondly, a stable claims and awards environment should mean that the reserves put aside by insurers to meet future claims would not have to be regularly adjusted to reflect new developments, such as increases in award levels.
In conclusion, I believe that the level and consistency of awards form a vital part element of our efforts to address the personal injuries claim process and the cost and availability of insurance. I would like to assure the Deputy that the Cost of Insurance Working Group will continue to focus on implementing the recommendations of the Report on the Cost of Employer and Public Liability Insurance in parallel with implementing those from the Report on the Cost of Motor Insurance. I am hopeful that the cumulative effects of the completion of the two Reports’ recommendations will include increased stability in the pricing of insurance for businesses and a more competitive insurance market.