Businesses failing to renew insurance due to "spiralling costs"

Fianna Fáil has called for a more "ambitious" approach from government to tackle out of control insurance costs

Businesses failing to renew insurance due to "spiralling costs"

Fianna Fail's Michael McGrath | Photocall file photo

Fianna Fáil has warned that Irish businesses are failing to renew their insurance policies due to the spiralling costs of premiums.

The party’s spokesperson on finance, Michael McGrath, has said that premiums across the sector have become unsustainable – and called for the government to take a more “ambitious” approach to tackling costs.

The government’s Cost of Insurance Working Group was established last year by Minister of State for Financial Services Eoghan Murphy - and presented its findings to government in January.

The group made 33 recommendations and called for 71 actions aimed at tackling insurance costs.

"Not ambitious enough"

On Newstalk Breakfast, Deputy McGrath warned that while the group’s recommendations are “having some effect” the response to the issue is “not ambitious enough and it is not being implemented quickly enough.”

“Every party and every politician has to work together to get to grips with this problem,” he said.

“It is not just motor insurance; it is business insurance as well. I know of a number of businesses that have now taken the decision not to renew their insurance – which is a crazy risk to take.

“It is something that needs to be addressed because the level of increases are not sustainable and it is hitting the economy hard.”

Rising premium costs

Figures from the CSO last year indicated that motor insurance premiums were up 38.3% in the year to July – with a longer-term analysis showing the average premium had risen by 70% over a three year period.

While the latest figures indicate that there has been no discernible increase in recent months – Deputy McGrath warned that “motorists are still receiving hiked up renewal notices in the order of 30% of 40%.”

He said that up to 70% of insurance claims are now settled outside of court adding that “there is a strong suspicion that in many cases the insurance companies are just paying ‘go away’ money.”

“I think the key reason is they won’t take the risk of allowing the final determination to be made in a court of the law because they don’t have confidence that there will be consistency in the level of award,” he said.

“We need to close those loopholes and make sure that there is a proper statutory process in place.”

Positive trend

Minister Murphy said while it is too early to say whether the working group recommendations are having an effect, “I don’t think it is coincidental the fact that for the second half of last year politicians were focused on finding implementable reform and those reforms are now underway.”

“We have seen a positive trend over the last five months but it is still early days,” he said.

“The government can’t interfere directly in the price of an insurance premium, that is for the company to price that risk and that is according to EU law.

“We have a dysfunctional market so we have to be very careful when the government makes any kind of intervention in a market that it does so in a way that it doesn’t impact upon competition or the stability of that market.”

Cost of Insurance Working Group

One of the key recommendations to come out of the working group was the establishment of a new personal injuries commission to examine awards for soft tissue injuries and compare them to averages in other states.

A new national claims information database is also being established to hold motor tax, insurance and driving records for all motorists.

Minister Murphy insisted “a lot of good work is being done across government” to tackle spiralling costs insisting, “it is not good enough to say, ‘well do it faster.’”

“If you look at building a national claims information database – it is not a small thing,” he said.

"You are talking about taking claims and insurance information from every insurance entity in the country and putting it into a new database in the central bank.

“It requires legislation; it requires a huge amount of work.”

Deputy McGrath said that the majority of the recommendations have been put off until the middle of next year and called for the government to be more ambitious in its approach.

Fianna Fáil is tabling a motion in the Dáil today calling for a speedier response to the problem.