Insurance premiums remain high despite promises of reform
Insurance still too costly as progress on system reform stalls, writes contributing editor Geraldine Herbert
Investigations by the European Commission into alleged anti-competitive practices on the part of the Irish Insurance industry took a further twist this week when it emerged that they are focusing on claims that restricting access to industry-specific databases was used to thwart new entrants to the market.
This is part of an ongoing investigation by the EU, who carried out raids on motor insurance companies in July 2017 over alleged cartel activity.
The cost of car insurance has fallen by just under 14pc over the past year, according to the Central Statistics Office (CSO) and by almost 20pc since the cost of premiums peaked in July 2016. From 2013 to 2016, average motor insurance premiums increased by 70pc. High motor insurance premiums have not gone away and most motorists are still paying significantly higher rates than they were in the past and many are enduring year-on-year increases.
However, the issue seems to have fallen off the Government's agenda. That is a view shared by Fianna Fail Spokesperson on Finance, Michael McGrath TD, who this week called on the Government to reboot its Working Group on the Cost of Insurance.
The Government set up the working group in 2016. It was initially headed by then junior minister and now cabinet minister Eoghan Murphy, who in September 2016 declared that "by the end of October I want to have identified the priority actions required to tackle the costs of insurance… During November and December I will aim to agree an action plan to enable the relevant government departments to commence the implementation of these priority actions in the New Year."
In January 2017 the first report from the group covered several key areas, such as improving data availability and reducing the costs in the claims process, with a view to bringing down high car premium costs for consumers but little progress has been made since its publication.
"It is hard to avoid the conclusion that the real meat of the recommendations, the key reforms, are being hobbled. They have certainly been stalled, at a minimum," Deputy McGrath said. "The national claims information database, which aims to provide accurate and reliable data for claims affecting the insurance industry and policy holders, was to be in place by next month, yet the full legislation has not been published. It is well behind schedule. It is a similar story with the fraud database; there is no sign of it."
Rising insurance costs are a feature for many motorists and the positive difference to the pricing of insurance premiums that was promised is yet to be seen. According to survey of 4,000 motorists by AA Car Insurance, over 42pc of respondents said that they strongly believe the issue of insurance prices is no longer as important to Government as it was 12 months ago.
Overall, the insurance industry blames the high cost of premiums on our compensation system, so in their view the level of court awards is the relevant issue.
The most recent report from the Cost of Insurance Working Group, published last week, concluded that while the numbers of injuries in Ireland are lower than in the UK, costs per claim are much higher here and the length of time it takes to settle claims is also increasing.
So what can be done to tackle the high cost of premiums?
Conor Faughnan of the AA believes more needs to be done to deal with uninsured driving and fraud, while Insurance Ireland, the representative body for the sector, argues that until personal injury award levels are benchmarked internationally and legislation is passed to give new powers to the Personal Injuries Assessment Board, motorists will continue to pay high premiums.
But not everyone is convinced that the price increases are solely as a consequence of compensation claims or that Ireland is a competitive motor insurance market.
"While there is an ongoing issue about exaggerated claims, and the fact that our compensation levels are higher than UK, that has always been the situation," said Dorothea Dowling, former chair of the last statutory independent investigation into the cost of insurance, the Motor Insurance Advisory Board. "Neither of those factors changed over the three-year period from 2013 to justify the 70pc increase in motor premium charges identified by the Working Group during a period over which they identified that overall claims costs only increased by 14pc. We have a long way to go yet before we arrive at the real answers as to why we are in this mess, again."
Peter Boland of the Insurance Alliance, a consumer action group, believes the allegations this week regarding restricted access to the Irish insurance market are shocking but not surprising. "Our members have suspected as much and have been paying the price for years. It is remarkable that such a valuable market, worth over €2bn, is controlled by so few underwriters with 90pc of the motor insurance market controlled by six companies and 80pc of business insurance controlled by six also."
Insurance Ireland is rejecting all allegations that they have imposed obstacles for new players to enter the market and insist that they have co-operated fully with the European Commission enquiry and is confident that its practices are fully compliant with competition law.
However, as insurance companies continue to post healthy profits while motorists continue to pay high premiums, the lack of transparency in the industry is a key issue. It is legally compulsory to have motor insurance yet consumers are being kept in the dark about premium pricing.
The most basic consumer protection for motorists is market transparency; this must be addressed before motorists can hope to see any meaningful reductions in their premiums.