Assessing the costs of car insurance

Motor insurance premiums are the subject of ongoing heated debate between consumers, Government and the insurance industry. In the last few weeks, the finger pointing continued with the industry blaming the Government, solicitors and members of the public for contributing to high insurance costs.

Frustrated consumers have long felt that insurers are unduly penalising them, younger, male drivers in particular.

Family Money has examined the issues contributing to the high cost of motor insurance in the State.

Premiums: The price of motor insurance is based on the gender and age of the driver, type of licence and standard of vehicle. Cars are rated using a group system which takes account of the performance capacity, engine size, cost and current value of the vehicle. The vehicle's fuel type and the price and availability of spare parts are also factored into the equation. Naturally, more powerful vehicles are a higher risk and are rated as such.

In addition, insurers take account of risks associated with the car's location and its use for either social or business purposes.

Some consumers believe that lack of international competition between insurers has contributed to inflated premiums levels. This is not the case according to Mr Vincent Sheridan, outgoing president of the Irish Insurance Federation's (IIF).

"The fact is that five of the leading European insurance groups are fighting head to head in this market in absolute and totally transparent competition," he said.

The industry claims that high premiums are a direct result of the level and number of claims awarded in the State.

Road deaths and accidents: According to the March issue of Consumer Choice magazine: "An estimated 415 people died in road accidents in 1999. This figure is slightly down from 1998 when 460 died."

In an effort to reduce these tragedies, the Government introduced the first National Road Safety Strategy The Road to Safety during the summer of 1998. The plan aims to reduce the number of road deaths by 20 per cent before 2002.

In a recent speech to the insurance industry and members of Government, Mr Sheridan said more had to be done to enforce the road traffic laws through increased and improved law enforcement.

In addition, the Garda should be provided with additional technology and manpower to allow enforcement of the Road Traffic Act. High motor insurance premiums might be reduced if the Government would law enforcement a priority and fully implements the National Road Safety strategy to reduce road deaths and accidents.

Lawsuits: Solicitors and members of the public also have a part to play in reducing high insurance costs, says the industry.

"In my view, the most serious issue affecting the level of motor premiums and one area in which no progress is apparent, is the litigious environment that exists in Ireland and the very high level of awards handed down by the courts," says Mr Sheridan.

The contribution of the legal profession to the current lawsuit driven culture should be questioned, he said. Despite ongoing criticism of the motor insurance industry, it says it has no option but to set premiums at a level which reflects the claims environment.

Younger drivers: Male drivers under 25 and their parents frequently express dismay at the level of motor insurance premiums available. However, many insurers have opted out of covering young male drivers as this business has proven too expensive to maintain. Insurance statistics reveal that inexperienced younger drivers have more frequent and more costly accidents than older drivers.

The IIF and the Driving Instructors Register of Ireland have created an educational system to assist younger drivers in reducing their premiums. After successfully completing the insurance incentive scheme through a number of driving lessons, the drivers may receive premium discounts.

Alternatives: Frustrated consumers have limited recourse as third-party fire and theft insurance is mandatory in the Republic. Discounts may be offered if the number of drivers on the policy is limited and the car is put into a secure garage at night. Choosing a higher excess amount or installing a car alarm may also reduce the premium. Children under 25 may reduce their costs if they are on the parents' policy.

If an individual is refused car insurance or given five excessively high quotes by insurers they may appeal to the Declined Cases Committee, a part of the Insurance Information Service run by the IIF. They may be contacted at (01) 676 1914.