Tuesday, 10 December 2019
Department of Finance
Motor Insurance Costs
As Minister for Finance, 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 to motorists.
Notwithstanding this, reducing the high cost of insurance generally has been a priority for the Government. The Cost of Insurance Working Group (CIWG) 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. The initial focus of the CIWG was the issue of rising motor insurance premiums and as part of that exercise, there was and has been extensive interaction with the insurance industry and its representative bodies. The CIWG has produced two reports the Report on the Cost of Motor Insurance and the Report on the Cost of Employer and Public Liability Insurance.
Arising from the work of the CIWG, there have been important steps taken to address the cost and availability of insurance including:
- The establishment of the National Claims Information Database in the Central Bank to increase transparency around the future cost of private motor insurance. The Central Bank is due to make its first report shortly;
- Reforms to the Personal Injuries Assessment Board (PIAB) through the Personal Injuries Assessment Board (Amendment) Act 2019 to strengthen the powers of PIAB around compliance with its procedures;
- The reform of the Insurance Compensation Fund to provide certainty to policyholders and insurers, resulting from the failure of Setanta Insurance;
- The recent changes introduced by the Central Bank of Ireland in relation to the renewal of insurance policies to assist the consumer to shop around for motor and home insurance;
- 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;
- Various reforms of how fraud is reported to and dealt with by An Garda Síochána, including increased co-ordination with the insurance industry, a divisional focus on insurance fraud which will be guided by the Garda National Economic Crime Bureau (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, and;
- The commencement and prioritisation by the Law Reform Commission (LRC) of its work to undertake a detailed analysis of the possibility of developing constitutionally sound legislation to delimit or cap the amounts of damages which a court may award in respect of some or all categories of personal injuries, as part of its Fifth Programme of Law Reform.
I believe that these reforms are already having a significant impact with regard to private motor insurance (CSO figures from October 2019 show that the price of motor insurance is now 27.1% lower than the July 2016 peak).
A further important consequence of the work of the CIWG was the establishment of the Personal Injuries Commission (PIC) and the publication of its two reports, which included a benchmarking of award levels between Ireland and other jurisdictions. This research showed that award levels for soft tissue injuries in Ireland were 4.4 times higher than in England and Wales. The PIC recommended that a Judicial Council be established and that it should compile guidelines for appropriate general damages for various types of personal injury. In carrying out this exercise, the PIC believes that the Judiciary will take account of the jurisprudence of the Court of Appeal, the results of its benchmarking exercise, etc.
The Government with the support of all parties in the Oireachtas prioritised the passing of the Judicial Council Act 2019. This Act provides for the establishment of a Personal Injuries Guidelines Committee upon the formal establishment of the Judicial Council. This Committee is tasked with introducing new guidelines to replace the Book of Quantum. While the Government cannot interfere in their deliberations, I believe that the Judiciary recognise the importance of this issue and are prioritising it accordingly.
I am hopeful that the creation of personal injury damage guidelines by the Judiciary can result in the lowering of award levels. Were this to happen, I would expect a lowering of the costs of insurance generally. In this context, I note the comments made by the Interim Insurance Ireland CEO Gerry Hassett recently that if award levels come down so will premiums. I believe that this is a very reassuring commitment and it is one the Government intends holding the insurance industry to.
In conclusion, while the cost of motor insurance has reduced for the majority of motorists, I would hope that the recalibration of award levels may result in further reductions, in particular for those that may not be seeing the same level of reductions. In addition, this coupled with the cumulative effects of the implementation of the two CIWG Reports’ recommendations will include increased stability in the pricing of insurance for consumers and businesses and a more competitive insurance market.