Buying motor insurance in other EU states remains cumbersome

As the European Union struggles to break down national borders, Irish consumers look increasingly towards British and continental insurers for more competitive rates. Unfortunately, it seems that shopping around in Europe will not make much of a difference when purchasing a motor insurance policy.

Legally, any consumer in an EU member-state may insure his or her car with any insurance company licensed to issue such policies in that member-state. This applies to compulsory civil liability insurance policies and to optional cover such as fire and theft. However, there are stumbling blocks along the road to potentially cheaper premiums.

"It wouldn't surprise me if consumers looked for cheaper policies abroad because of the cost of policies here, but I doubt if it's possible for people to get insurance abroad because they'd have to take the claims experience in Ireland into consideration," said Mr Cyril McHugh of the Society of the Irish Motor Industry.

According to a spokeswoman for the Irish Insurance Federation, the Republic is not a particularly attractive environment for motor insurers because claims costs are so high.

"It's the cost of claims rather than their frequency. European surveys have put us half way down for frequency but Ireland came out on top in terms of personal injury compensation," she said.

Insurers in the EU are not obliged to trade in different member-states and if they do they are allowed to offer different terms to those provided in their home state, says the European Consumer Centre (ECC).

There are also difficulties presented under EU legislation that drive up costs for motor insurers coming in from other member-states.

"European regulations prohibit insurance companies from offering civil liability motor insurance in Ireland unless they are members of the Motor Insurer's Bureau of Ireland (MIBI)," says the ECC. This means they must also contribute to the claims guarantee fund like all Irish insurance companies.

Any motor insurance company offering civil liability here must also have an office here or a claims representative in this State authorised by the insurer to handle third-party claims.

"While it may appear that these rules prevent the Irish driver from getting a fair deal, the purpose of the rules is to protect the general public, and in particular, those who have to make a third-party claim against the driver of a motor vehicle," said the ECC.

In general, and as discussed in previous Family Money columns, there are no particular rules in Ireland regarding distance contracts so consumers purchasing services from insurers in other EU member-states may be at risk. Until new EU legislation comes into force in June 2000, there is no guarantee of a cooling-off period or the right to withdraw from insurance contracts. Each contract determines which rights, if any, are granted to the policyholder.

Should a consumer need recourse against a non-national insurer, the procedure is the same for national insurers. Once the company's internal complaint systems are exhausted a case may be taken to the Insurance Ombudsman. However, the Ombudsman has no power to compel any insurer to implement his decision. If the amount in question is below £600 (€762) the consumer may take the complaint to the Small Claims Court.