Car insurance crisis must be tackled head-on
Published 08/11/2015 | 02:30
All year now, motor insurance premiums have been rising - and rising at a rapid rate.
The latest official statistics show that the average motor premium is up 26.5pc in the past year.
Yet there has been no discernible response from the Government, with the Central Bank - the regulator for the sector - yet to make any public statements about the crisis.
The stance of the regulator seems to be that premiums will have to rise so that companies build up their claims reserves.
This is nothing short of shameful. We have been here before with shocking rises in premiums - but it seems that regulators and the Government have been caught on the hop, despite this journalist for one writing repeatedly about rising premiums since last January.
Motor insurance cover is mandatory, which means the authorities ought to be more aware of what is happening in the market.
The regulator and the Departments of Finance have let us all down on this one.
The Budget giveaways will be more than wiped out by premiums hikes.
A premium that cost €500 last year is now €130 more expensive.
This extra cost is effectively a backdoor bailout for insurance firms, who have disgraced themselves by failing to adequately provide for higher levels of claims.
Insurers blame legal costs and more claims, and changes in the courts structures, for higher premiums.
Yes, greedy and unscrupulous lawyers who encourage dodgy claims - and weak judges who fail to throw out these cases - are part of the problem. That is something that should certainly be tackled.
And the failure to reform the legal profession is a scandal and a disgrace, and one that every consumer is paying for.
But it is not the whole story.
Insurers have played their own stupid part in the crisis by lowering premiums to unsustainable levels in a dumb play for market share.
And insurers and brokers are continuing to talk up premiums by making predications that premiums will go up by up to 20pc in the coming year. This is a form of price signalling to industry participants, and appears to contravene competition laws.
The more premiums rise, the more money brokers make as their income is a percentage of the premium.
It is quite clear what needs to be done. We need co-ordinated action from the Government, the Central Bank and consumer groups.
A body like the Motor Insurance Advisory Board must be set up urgently to come up with solutions.
It worked before, and it can work again.
Sunday Indo Business