Sunday 11 December 2016

Government considering move to tackle rising motor insurance costs

Pressure mounts for new plan to deal with bust insurers, writes Shane Phelan

Published 22/06/2016 | 02:30

Kevin Thompson: Situation needs to change for insurers. Pic. Robbie Reynolds
Kevin Thompson: Situation needs to change for insurers. Pic. Robbie Reynolds

The Government is to consider changing arrangements that hold the wider insurance industry liable for claims against individual insurers who go bust.

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The move comes amid claims by insurers that an agreement with the Department of Transport is contributing to increased premiums, as they have to factor in the risk of a competitor going to the wall.

Officials told the Irish Independent a report on the issue, which has been under examination since January, is at "an advanced stage" and will be submitted to Finance Minister Michael Noonan and Transport Minister Shane Ross shortly.

It comes amid mounting pressure on the Government to tackle motor insurance costs, which have spiralled by 60pc in the past two years.

Both the High Court and the Court of Appeal have found that the agreement between the Department of Transport and the Motor Insurers' Bureau of Ireland (MIBI) means solvent insurers can be held liable for claims when an insurer goes bust.

The finding is currently being appealed by the MIBI to the Supreme Court. Up to now, the MIBI has unsuccessfully argued that claims should be met from another source, the High Court-administered Insurance Compensation Fund.

The rulings mean the country's 40 solvent insurers are liable for an estimated €90m in claims against drivers who were covered by Setanta Insurance, which went into liquidation in 2014.

But the costs will not be absorbed by insurers and instead motorists can expect a once-off €50 hike in their premiums.

Read more: Shane Phelan: Ten reasons we're all now paying more for our motor insurance

Insurance Ireland chief executive Kevin Thompson has said the situation needs to change as insurers are being asked to price their products to factor in the cost of a competitor going to the wall.

A spokesperson for the Department of Finance said a review of the compensation framework would "make recommendations on the arrangements for motor insurance arising from the liquidation or administration of an insurance company and on the arrangements in relation to the payment of compensation for victims of uninsured and untraceable drivers."

The spokesperson said the review was aimed at finding a solution that was "comprehensive, effective, affordable and consumer focused".

As well as examining whether current arrangements can be tweaked, the review has examined frameworks for motor insurance compensation in other EU jurisdictions.

Once the recommendations are delivered, the review group will work on a second report examining the factors contributing to the increasing cost of insurance.

Responding to a question from Sinn Féin TD Imelda Munster, Mr Noonan said the second report would "be identifying what short-term measures can be introduced to help reduce the cost of insurance for consumers and businesses."

The current review group falls well short of the task force proposed by Fianna Fáil.

Although a Fianna Fáil motion on the issue was passed in the Dáil earlier this month, the Government has said it favours allowing the existing review group to complete its work.

Meanwhile, Mr Noonan has revealed new figures showing the cost of the collapse of Quinn Insurance Limited in 2010 has been over €1.3bn.

Claim

Replying to questions from Fianna Fáil TD Michael McGrath, Mr Noonan said: "The position to date is that a total of €1.333bn has been drawn down from the Insurance Compensation Fund by the joint administrators."

Mr Noonan said the ultimate final cost to the Insurance Compensation Fund would be determined by the outcome of legal proceedings issued by the administrators against PricewaterhouseCoopers. The accountancy firm is facing a claim for €800m over its auditing of Quinn Insurance Ltd.

However, Mr Noonan said he was satisfied there would not be any further applications from the administrators for contributions from the Insurance Compensation Fund.

Irish Independent

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