Saturday 21 September 2019

We need a dedicated minister to control insurance industry. Time to call Dorothea

Ivan Yates

Ivan Yates

The benefit of having a long-serving parliamentarian as Taoiseach (Enda Kenny celebrated 40 years as a TD last week) is to draw on experience when identical problems of past administrations, such as spiralling insurance premiums, recur.

Since January 2014, motor insurance costs have escalated by 34.9pc, with prospects of a further 15pc hike.

Motor insurance, unlike other non-life products, isn't optional - 2.6 million vehicles must have insurance cover or it's a criminal offence.

As now, insurance costs became a hot topic in election campaigns of 1997 and 2002.

A short history lesson: in 1988, the government of the day abolished jury awards for most personal injury cases, replacing them with judges alone adjudicating, to constrain settlements through consistency. It didn't work. Between 1991 and 2001, insurance premiums rose by 81pc.

The Motor Insurance Advisory Board (MIAB) was established in 1998 to review all aspects and causes, making 100 recommendations in 2002 and having experienced significant delays to lack of access to internal industry data.

Eventually, the Personal Injuries Assessment Board (PIAB) was enacted in 2003 to streamline settlements.

One person consistently championed consumer causes against exorbitant insurance costs. She is Dorothea Dowling, who served two consecutive terms as PIAB chairperson. Her fearless fight against multi-national PLCs was based on a unique, encyclopaedic knowledge of all facets of insurance, having worked as CIE's groups claims manager.

A formidable lady, she overcame tactics of information concealment from a sector that insists on a minimum net 6pc profitability.

Her success was enabled by unswerving sustained underlying political authority from Tánaiste Mary Harney.

Dorothea's departure in 2013 mirrors the political and administrative neglect of insurance issues, leading directly to premium hikes again. Higher premiums always directly match patterns of greater awards through claims payments. Between 2009 and 2014, total insurance revenue was €3.4bn, with profitability of €195m (at 6pc).

Spectacular problems with Royal Sun Alliance (RSA) and FBD led to gigantic losses. However, generic sectoral data masks the profits from other firms such as AXA and IPBS - yet all seek higher premiums.

The first key issue is ensuring transparency of company figures. This obfuscation facilitates higher profiteering through softening up of public opinion to expect mammoth increases.

The Central Bank is charged with regulating the insurance industry, but in reality only effects prudential supervision to ensure viability.

This is compounded by zero political responsibility within government - there's no Minister for Insurance.

Previously, business and SME issues of unaffordable premiums covering employers and public liability insurance costs meant policy control was exercised by the Enterprise Minister.

Because the Enterprise Minister, Mary Harney, was also Tánaiste, she could assert authority over the departments of Justice and Finance.

Today, no one accepts responsibility or exercises inter-departmental authority; so problems fall between all ministerial stools.

The Department of Justice is the chief culprit behind our current chronic problems.

In July 2013, despite strong advice not to raise ceilings on judicial awards for personal injuries (separate to contract cases), former Justice Minister Alan Shatter elevated District Court limits from €5,000 to €15,000 and Circuit Court limits from €38,000 to €60,000.

As feared, this proved to have disastrous consequences for claims provisions, as cases pending before these courts have been ratcheted up accordingly.

This caused havoc with the previous game-changer known as the Blue Book, which set out standard quantum payments for minor (non-fatal) injuries.

Instead of litigants minimising attritional legal costs from both sides, hundreds of millions of euro are now incurred in unnecessary court battles - only 20pc are settled through PIAB.

Despite the Troika's urging, the Government has failed to enact the Legal Services Bill.

The failure to establish the Office of Independent Legal Costs Adjudicator also means continued reliance on the costly Taxing Master process.

There are practical solutions.

The Automobile Association last week set out a five-point plan, which is readily implementable.

The plan includes eliminating fraud of illegal non-insurance by replacing fake motor discs with camera technology of car number plates (as in Northern Ireland); full insurance industry transparency of accounts; revised regulation; standardising awards through legal reform; and effective enforcement measures.

These proposals are crying out for a political response.

Meanwhile, €620m for the Quinn Insurance bailout is being repaid through a 2pc levy, which is set to continue until 2037.

No one defends motorists from being the fall guys for every debacle.

The appointment of a task force to implement reforms and an overall minister for insurance is now a necessity.

The political benefits of €20 per week in populist tax cuts are frittered away by extra household liabilities for car and home insurance.

It's time the Government reversed this indifference - a good starting point would be to give redoubtable Dorothea Dowling an urgent call.

Irish Independent

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