Setanta mess is a long way from being over
Published 13/09/2015 | 02:30
The lawyers are happy, which probably means the rest of us should be wary. The Law Society, which represents solicitors, was quick recently to greet a judgment of the High Court that insurers say will see motor insurance premiums rise.
Director general of the Law Society Ken Murphy welcomed the fact that the High Court confirmed that the Motor Insurers Bureau of Ireland is liable for claims against the policyholders of the insolvent insurance company Setanta.
The judgment means that the estimated 1,750 outstanding claimants can now look to the MIBI to meet their claims, the lawyers contended.
The MIBI is used to compensate drivers hit by uninsured drivers and is funded by a levy imposed on all insurers.
The judge rejected arguments that the State's Insurance Compensation Fund - used up now to cover claims of insolvent insurance companies - should foot the €90m cost of Setanta claims.
All motor premiums already have 5pc in levies imposed on them to finance the Insurance Compensation Fund. It has so far paid out €1.158bn to cover claims associated with Quinn Insurance.
However, the fund only pays 65pc of a claim, or €825,000 at most. The MIBI pays out in full.
The argument of the lawyers is that the High Court decision means that those 1,750 people with claims by and against Setanta will now get paid after a 17-month wait.
But will this judgment speed up the payment of claims?
The answer is that there is no immediate prospect of claims being paid, as the judgment will be appealed by the insurer-controlled MIBI. It could be months, at the earliest, before the appeal is heard.
The whole Setanta Insurance collapse has created an unholy mess. Remember that Setanta was operating here, but was regulated out of Malta. Its shareholders have yet to be publicly revealed.
Now that Setanta has gone belly-up, all drivers will pay, including the prudent who have never had an accident.
And insurers will now, for the first time, have to effectively put more money aside in order to allow for the possibility of one of their rivals going bust.
This comes at a time when motor premiums are shooting up due to higher levels of claims, demands by regulators that insurers put more funds into their reserves, under-pricing policies and investment losses.
Just when you thought the motor insurance situation could not get any worse, it has.
The losers are not just those with a claim that should have been covered by Setanta, but two million drivers.
Sunday Indo Business