Consumers face premiums hike
New insurance levy could be imposed to cover fall-out, experts warn
Published 31/03/2010 | 05:00
CONSUMERS were last night warned they face having a levy imposed on all insurance premiums as a result of the High Court move to put Quinn Insurance into administration.
Higher insurance premiums are also likely in the fall-out from the Quinn move.
The Financial Regulator brought an emergency application to place Quinn Insurance into administration following fears that it would not have sufficient funds to meet claims. The insurer has a deficit of €200m in its reserves.
Asked about a levy last night, Financial Regulator Matthew Elderfield said the administrators to the insurer could apply to have a levy put in place if they need to shore up major losses.
When PMPA collapsed in early 1982 a levy was slapped on all polices in a bid to make up for the losses of that insurer. A levy was also imposed when the Insurance Corporation of Ireland collapsed in 1985.
President of the Irish Brokers Association Paul Carty warned premiums would continue to rise. He also said a levy on all premiums may have to be imposed. "Who else is going to pay for this? History shows there was a levy when PMPA collapsed. History could be repeated," Mr Carty said.
A levy of up to 2pc of the value of policies could be imposed, insurance experts said.
The High Court move means the administrators will run the business as a going concern in the interests of policy holders under different management.
The Financial Regulator assured Quinn policy holders they "can continue to renew policies, carry out new business and make claims in the normal way".
The High Court move affects Quinn businesses offering home, health, motor and public liability insurance. The administrators will run only the general insurance business.
Quinn is the second largest general insurer in the market, with around one in five motorists insured with the Cavan-based company. Its healthcare division has more than 400,000 policy holders, representing around 22pc of the private health insurance market.
Recent figures from the Central Statistics Office show that home insurance rose by 14pc in the past 12 months with car insurance up by 7.5pc in the past 12 months.
Mr Carty said insurance companies were likely to continue to push up premiums.
"I believe the fact that Quinn has gone into administration will offer other insurers further encouragement to increase their rates," the Irish Brokers Association president added.
Mr Carty said consumers insured with Quinn need to think twice before renewing their policy with the company.
Vice-chairman of the Consumers Association Michael Kilcoyne said consumers would have to be protected "as this will probably result in increased premiums".
Rivals to Quinn and insurance brokers reported a surge in calls to their offices last night as those considering renewing their premiums with Quinn sought advice on what to do.
Consumer advocate and founder of the www.askaboutmoney.com website Brendan Burgess said anyone about to renew their insurance with Quinn should seek a quotation somewhere else. He added: "It appears that Quinn has a deficit of €200m. It is likely that this will be recouped over time from an insurance levy."
Quinn Life Direct said it was not affected by yesterday's action as it was regulated separately.