Crying need for cut in uninsured driver numbers


THE revelation by FBD, the agri-insurance group, that motor insurance premiums are on average £26 higher because of the high level of uninsured drivers must be a cause for concern. That may not appear high but it is 6.5 times greater than the estimated £4 extra per car experienced by drivers in Britain.

That £26 represents a levy of more than 10 per cent on many policies. It might be tempting to ignore this because the real cost of motor insurance has fallen by some 2 per cent over the past three years. Indeed, that trend could accelerate. Guardian PMPA, the largest Irish motor insurer, with 40 per cent of the private motorist market, has predicted much higher cuts.

However, a large part of that levy could be reduced through a greater control on uninsured drivers. No definitive figures are available for uninsured drivers (for obvious reasons) but they are estimated to represent 6 per cent of Irish motorists. That, it has to be admitted, is an exceptionally high figure.

Insured drivers bear the brunt because they, in effect, bail out the uninsured drivers through the Motor Insurers Bureau (MIB). FBD's chairman, Dr Patrick O'Keeffe, rightly raised the problems when he addressed his shareholders last week.

He noted that the total MIB charge on the insurance industry for 1995 came to £25.4 million, representing a 22 per cent increase on the 1994 figure. In an ominous aside, he added that the latest figures indicated an "escalating problem".

Those figures speak for themselves. But what about a solution?

FBD wants better law enforcement, noting that "organisation of the gardai, perhaps, has not kept pace with present day demand". It would be hard to disagree with FBD's view that a new and radical approach is necessary to tackle the high cost caused and flagrant breach of the law by uninsured drivers.

FBD suggests the setting up of a separate agency to pursue car tax evasion as well as the lack of insurance. The maximum penalties should act as a deterrent.

Under present legislation there is a maximum fine of £1,000 and/or six months imprisonment. Also, the gardai are empowered to impound vehicles being used without proper insurance. However, fines tend to be less than £500.

Uninsured drivers, of course, are not the only reason for the high cost of car insurance in Ireland. Irish insurers have always contended that their motor premiums are higher than those in Britain because they have to contend with a higher number of claims, much higher awards and a more expensive legal system.

The Society of the Irish Motor Industry and the Automobile Association have indicated that the costs of motor insurance are almost twice the EU average. And there is little indication that the move to non jury courts for personal injuries and the campaigns against drunk driving and for safer roads are having the desired effect.

It is ironic that the Minister of State for Consumer Affairs, Mr Pat Rabbitte, has initiated an independent study to investigate the high cost of motor insurance. Ironic, because the Government is directly responsible for 2 per cent of those costs.

The motor industry was originally charged a 2 per cent levy in 1984 to fund the old PMPA company which was faced with collapse. This was reduced to 1 per cent in January 1992 and was removed at the end of that year.

Seeing a useful way to boost tax revenue, a Government levy of 1 per cent (this had nothing to do with the old PMPA company) was put on non life policies in February 1993 and this was subsequently increased to the present 2 per cent level. That brings in more than £20 million per annum.

The old PMPA company, now operated by Primor plc, was bailed out by the insurance compensation fund. It now appears to be ticking away nicely. The High Court last month was told that it may still require State funds to meet outstanding insurance claims, estimated at £5.74 million at the end of 1994.

That might have caused a little scare but, based on the unpublished 1995 results, it is understood to have sufficient funds to meet all commitments. Therefore, it appears most unlikely that there will be any further calls on the compensation fund.

However, the motor insurance industry (and the remaining non life business) will not benefit from this. The motorist will continue to be burdened by the 2 per cent Government levy and the 10 per cent plus extra costs on premiums because of the high level of uninsured motorists.

The motor insurance companies are now facing a drive to reduce costs through rationalisation, like their counterparts in the life assurance business. Nevertheless, there is a crying need to reduce the number of uninsured drivers who are being subsidised by the insured drivers.