Government group sets out plan to address spiralling cost of motor insurance

The group has made 33 recommendations as CSO data reveals the cost of motor insurance rose nearly 40% in the first six months of last year

Government group sets out plan to address spiralling cost of motor insurance

Minister of State for Financial Services Eoghan Murphy

A government working group has made a range of recommendations aimed at bringing down the spiralling cost of motor insurance.

The Cost of Insurance Working Group was established last year by Minister of State for Financial Services Eoghan Murphy and has presented its findings to government this afternoon.

Figures released by the Central Statistics Office (CSO) last year indicated that motor premiums were up 38.3% in the year to July.

The CSO figures showed that over the last three years, the average premium rose by 70%.

Late last year the director of government affairs at Insurance Ireland - an umbrella group representing Irish insurance companies - moved to reject claims that the insurance industry was acting like a “cartel.”

Declan Jackson from Insurance Ireland was responding to a government report which found that an unwillingness among insurance companies to share data was contributing to the large rise in premiums.

The committee found that consumers have effectively been told to accept increases without any explanation.

This afternoon the working group made 33 recommendations aimed at addressing the cost of insurance under six main themes:

  • Protecting the consumer
  • improving data availability 
  • Improving the personal injuries claims environment
  • Reducing the costs in the claims process
  • Reducing insurance fraud and uninsured driving
  • Promoting road safety and reducing collisions

Cost of motor insurance recommendations 

One of the key recommendations contained within the plan will see the establishment of a new personal injuries commission - chaired by retired High Court Justice, Nicholas Kearns.

There have been repeated calls to cap the size of payouts for certain injuries - most notably whiplash which accounts for 80% of all motor insurance claims.

The commission would examine pay-outs for soft tissue injuries and compare them to the average awards in other countries.

The final decision on the level of awards made in court will still remain with the judiciary.

The group is also expected to recommend that a new national claims information database be set-up within the next 18 months.

The database will hold motor tax, insurance and driving records for all motorists.

The database is expected help identify repeat claims and make it easier to catch uninsured drivers.

Insurers will now also have to explain to customers why their premiums have risen.

Speaking at the publication of the report this afternoon, Minister Murphy said the government can't interfere with prices under EU law:

"insurance companies must according to risk," he said. "But if you look at the consumer protections actions that are in the report, they speak to making it mandatory for insurance companies to explain to a driver why their insurance premium might have gone up - even in a situation where they haven't had any additional penalty points or they haven't had a claim made against them.

"To explain what exactly is behind that increase and that is where we talk about fairer premiums and getting to the root of that."

The gardaí will also be provided with resources to allow for automatic number plate recognition - potentially bringing an end to the current system where disks are displayed on windscreens, with authorities able to automatically detect a car’s insurance status through a simple check of the registration plate against the database.

Conor Faughnan, director of consumer affairs for AA Ireland said fraud, litigiousness and the high cost of pay-outs have all been driving up the cost of insurance premiums.

“It is partly that the awards are very high but it is also that the awards will vary in amount depending from case to case and from court to court,” he said.

He said efforts to standardise pay-outs across the courts, “would be helpful in itself and would take that gambling element out of it.”

"No silver bullet" to address cost of motor premiums

Speaking at the publication of the report this afternoon, Minister Murphy warned that there will be “no silver bullet” to address premiums in the short term.

"Cooperation and commitment between all bodies and individuals with a stake in a stable and accessible insurance market can deliver fairer premiums for consumers without unnecessary delay,” he said.

“In taking action and implementing the Report’s recommendations, this will lead to greater stability in the pricing of motor insurance and will help prevent the volatility that we have seen in the market in the past - both up and down. 

"It should also better facilitate potential new entrants to the market.”

Mr Faughnan said it is important that the group provides guarantees on when the recommendations will be implemented.

“We have got to see a timeline and agencies committed to the implementation of these recommendations because if they are just a set of bullet points for everybody to applaud, well then that is a good day today but it doesn’t really add up to much unless they commit to implementing,” he said.

Implementation timeline

The new Personal injuries Commission will be established this month and "begin immediately to review a number of key issues that speak directly to the cost of personal injuries."

The commission will make its first report to the minister of state by the end of 2017.

The National claims information database is due to be established by the second quarter of 2018.

The Working Group will continue to meet throughout the year as the recommendations are implemented.