Thursday 23 November 2017

Insurance companies warn of motor premium hikes on back of Setanta Court of Appeal ruling

Setanta's web page when it was in business; it went into liquidation in April
Setanta's web page when it was in business; it went into liquidation in April

Charlie Weston, Personal Finance Editor

INSURANCE companies have warned that motor premiums will rise further following an appeal court judgement.

The Court of Appeal has upheld an earlier judgement that Motor Insurers’ Bureau has to cover €90m cost for the collapse of Setanta Insurance.

The Motor Insurers’ Bureau of Ireland (MIBI) was put in place to compensate victims of road traffic accidents caused by uninsured and unidentified drivers.

The bureau had argued that the €90m claims associated with the collapsed Setanta should be covered by the Insurance Compensation Fund, which traditionally compensates those impacted by an insurance company insolvency.

The MIBI argued it should not have to pay out on the claims and wants the court to set aside a High Court decision it is liable in respect of claims against persons insured with Setanta at the time of its liquidation.

The Law Society has opposed the appeal. It says it was envisaged, in all the various agreements governing the bureau since it was established in the 1950s, that it would have to pay out in the event one of its members became insolvent.

Now the Court of Appeal has upheld the original High Court decision.

Chief executive of the Motor Insurers’ Bureau Patrick O’Brien expressed disappointment at the court of appeal judgement. He called for talks with the new Government to sort out the issue.

“This disappointing decision has significant implications for the MIBI and the wider motor insurance industry.

“For that reason, we will be seeking urgent discussions with the incoming Government to clarify the respective roles of the MIBI and the Insurance Compensation Fund, in the eventuality of further insolvencies in the insurance sector.” 

Mr O’Brien said that if the MIBI is required to provide for these claims, which amount to an additional 150pc of its annual claims’ budget, “this will have significant implications for insurers and can only further exacerbate the cost of premiums paid by insured motorists”.

Premiums are already up 30pc in the last year.

Insurance Ireland, which represents insurance companies, said the judgement has far reaching implications for customers, claimants and the sector.

Kevin Thompson, of Insurance Ireland, said the implication of the decision was that liquidation will become a viable option for imprudent insurers who will be able to “dump” their losses on surviving insurers, creating a distortion in the insurance market that no other sector would be expected to function under.

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