The simple fact is that any Budget gains will be hit by motor premium increases
Published 14/10/2015 | 02:30
In their article for the Irish Independent on October 9, Insurance Ireland ironically confirm my point that €1bn of what policyholders pay for motor and liability insurance is not accounted for in published data on personal injury claims which we are told are the cause of increased charges.
What this means for consumers is that we have no transparency on the 24pc price increase over the past year nor on the further 20pc increase signalled over the next year by some insurers.
In simple figures for a family budget, a €600 motor premium will be increased by nearly €300 after levies paid to the Exchequer. For many people that extra cost will significantly erode what they hope the Government can deliver in the Budget.
It is necessary to restate the known facts.
From the website of the Central Bank we can see the annual publication of insurers' statutory returns. These show the totals (only) of payments on claims along with relative premium income for motor and liability at a net total of €1.4bn (Tables 15 & 17) in 2014.
If you go to the website of the Courts Service you can see on page 42 of the 2014 annual report that the total of all Court awards last year was €169m.Even if we were to pretend that every one of the 1,527 Court awards fell to be paid by members of Insurance Ireland (although readers will know that many multi-millions euro cases relate to medical negligence will falls on the State and in turn the taxpayer) the value of those awards would equate to 12pc of premium.
Insurance Ireland estimate, on what they call a 'generous' basis, that 20pc of claims payments is accounted for by PIAB injury awards. Why is there a need to estimate, generous or otherwise? If you go to the website of the Injuries Board you will find the PIAB 2014 annual report.
On page 23 it clearly gives the value of accepted awards for motor and liability claims at €166m with a delivery cost of €11m making a total of €177m. That would account for another 12pc of premium.
So above amounts of €169m and €177m total €346m, which equates to 24pc of premium, relate to published records on injury compensation awards. That is being generous in terms of accountability since medical negligence and many other Court awards against organs of the State do not relate to these insurers.
Insurance Ireland have, however, added another piece to the jigsaw of motor claims costs as they (to quote) "estimates that 25pc relates to vehicles in all of the motor accidents that happen every day". Why the estimate? Do they not know?
In the same article Insurance Ireland say 'The Central Bank requires detailed and frequent returns from insurers, including detailed claims returns, and they publish these annually". I'm sorry but I cannot find those details, other than the totals of payments in and out as referred to above from Tables 15 and 17.
What you can find, however, on the Central Bank website is their letter of October 7, 2011, to non-life insurers after inspections by the Regulator of over 6,000 injury files. To that letter was attached an Appendix with 16 headings of data insurers should be recording. While making very clear than not all insurers were at fault, the Central Bank expressed concern that "certain data provided initially by a number of insurers was either incomplete or not in the format requested by the Central Bank". The Motor Insurance Advisory Board [MIAB] had similar issues with insurer data during their investigation. No doubt that has all been resolved by now.
For clarity, the MIAB was 'stood down' in 2004 and I retired from PIAB on April 3, 2014, so I do not have a brief for either of those organisations.
However, it saddens me to see that half of the hard-won 40pc premium savings that were delivered to consumers over a decade of investments in reforms is being eroded so quickly. We can ill afford this backward step as we rebuild the economy. Far from my being "in denial about the existence of a crisis" as asserted by Insurance Ireland, I am acutely aware of it. I also readily recall the previous crisis which preceded the 2002 MIAB report after insurance costs had increased by 81pc subsequent to the previous jurisdictional increases. What that MIAB investigation found, compared to what insurers might have wanted to focus on solely, was quite complex. Matters are unlikely to be more simple now and it might be wise to test the reasons we are being given today.
Back in 2002 among the more straightforward solutions which were devised by MIAB included reducing barriers to motor policyholders moving from one insurance company to a better value one.
A subsequent survey found that 80pc of policyholders who switched providers made savings. The Competition and Consumer Protection Commission found in March this year that "for comprehensive cover the difference in quotes received was found to be between €156 and €1,249" and those details are posted on their website.
It seems the only action consumers can take right now is to shop around while we await transparency. Perhaps thereafter, armed with hard data, Government action will be taken to design appropriate reforms to halt the upward spiral of whatever is behind the recent price increases?
Dorethea Dowling was chairwoman of the Injuries Board for 10 years until she retired last year. She is also a former head of claims for the CIE group