Dysfunctional motor insurance market must be probed
It is time for the Government to try and slow down spiralling premium rates by instigating a root-and-branch review of the Irish motor insurance market.
The motor insurance market is dysfunctional. It is not working for insurers at the moment - and with premium rises of between 16pc and 20pc, it most certainly is not working for drivers.
And this comes at a time when the prices of so many other goods and services are falling that we are living in a time of deflation.
The list of culprits for this sorry state of motor premium inflation is long.
Higher levels of claims, more drivers using lawyers to seek compensation, low levels of reserving in the industry, and poor investment returns for insurers are among the main reasons for the spike in premiums.
This can't go on, so it is time to go back to a solution that worked before and can work again.
The last time we had a motor insurance crisis the then government set up the Motor Insurance Advisory Board.
It was headed up by the peerless Dorothea Dowling, who was then the head of claims at CIE. It reported in 2002 and made 67 radical recommendations.
That report led to the setting up of the Injuries Board, which does not pay legal costs. This led to lower insurance premiums.
Claims are now rising fast again, sending premiums shooting up.
Now we need to repeat the trick of an official inquiry. We need it to come up with a template for a radical reform of the insurance market.
A new motor insurance advisory board should consider the capping of claims amounts, examine the operation of insurers, scrutinise the role of the Central Bank, look at reserving by insurers, and probe uncompetitive practices in the industry.
Insurers have been incredibly stupid by engaging in below-cost selling yet again. And this time, we should fully implement the recommendations. Many of the 2002 report's recommendations were not put in place. These included a call for annual review being carried out of motor premiums by regulators.
Also demanded was the reversing of then plans to allow the district and circuit courts to make larger awards. That is a problem again now.
A new motor insurance advisory board could recommend changes to the Injuries Board. This body does not pay legal costs, but claimants can go still go to court if they reject an award, and get their legal costs paid if they win.
Drivers deserve nothing less than radical reform of the system.
Sunday Indo Business