Ciarán Hancock: Less is more when it comes to motor insurance

The issue of motor insurance was back in the news this week. On Monday, Irish-owned FBD surprised the markets by announcing a pre-tax profit of €11.4 million thanks, in part, to some benign winter weather.

Chief executive Fiona Muldoon called for the Government's 71 action points to deal with the cost of motor insurance to be reduced to between three and five points that might actually deliver on reducing premiums for customers.

Her point is that sometimes less is more and that it would be better for the Government to focus its efforts on the big ticket items that might actually tackle the underlying issue.

The multiple action points flowed from a comprehensive report from an interdepartmental group that was set up and chaired by Eoghan Murphy, the Minister of State for Financial Services. For a variety of reasons that have been well aired at this stage, Irish drivers have seen their premiums shoot up in the past two to three years.

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Premium rises

In FBD’s case, its motor customers have been hit with premium rises of 50 per cent over the past three years.

On Tuesday, the Central Bank of Ireland issued a report on how Irish motor insurance providers are meeting the standards set out under consumer protection rules, but there is still room for improvement.

An inspection by the regulator found that although the providers inspected have the correct procedures and processes in place to ensure compliance with the requirements under the consumer protection code, 53 per cent of claimants said they were dissatisfied with some aspect of the claims process.

This inspection won't have covered Setanta Insurance, the Malta-based entity that collapsed in 2014, leaving about 75,000 motorists here without cover. But you can be sure that its former customers are highly dissatisfied with how their claims are being handled.

Almost three years on from its collapse and 1,660 claims have yet to be processed due to a row over who should pick up the bill – the State’s Insurance Compensation Fund or the industry-run Motor Insurers’ Bureau of Ireland (MIBI).

Supreme Court

A verdict on the issue is awaited from the Supreme Court after two lower courts found that MIBI should be responsible for meeting the shortfall in funding, much to the disgust of the industry.

The liquidator in Malta, Paul Mercieca, a retired former head of Deloitte, who might now wish he hadn't gotten involved in this long-running saga, has estimated that he will only be able to meet about 30 per cent of the costs, which could be as high as €95 million. The liquidation process itself has already cost more than €6 million.

Separately, Enterprise Insurance, a Gibraltar-regulated entity, collapsed last year. This affected some 14,000 motor insurance customers in Ireland with more than €6 million in claims outstanding.

On Wednesday afternoon, Fianna Fáil’s finance spokesman Michael McGrath will introduce a motion dealing with these issues but primarily with Setanta.

Setanta policyholders

McGrath has received representations from former Setanta policyholders who have claims dating back to 2012, two years before the insurer went out of business. It’s an appalling situation and his motion, which is non-binding on the Government, should find support from other quarters of the Dáil.

He will call on the Central Bank of Ireland to undertake an awareness campaign to ensure that motorists are fully informed about the regulatory status of firms selling motor insurance here but prudentially regulated here.

McGrath is likely to be pushing an open door here as I understand that just such a campaign is under consideration by the regulator.

Legal action

He has also called on the Government to consider taking legal action against the Maltese and Gibraltar authorities for losses arising from inadequate regulation of Setanta and Enterprise respectively.

The State might have a strong case to argue although there is little by way of precedent in the EU for suing a regulator for negligence and incompetence. And it might come across as a bit rich for Ireland to be suing financial regulators in another EU state for failures in their regimes given the shortcomings in our own system before the spectacular crash in late 2008 of our banking and property markets.

Suing for regulatory failure can also be a two-way street. It’s worth bearing in mind that there’s far more insurance regulated in Ireland but written for overseas markets than vice versa.

In 2014, €35.2 billion in premium income was written by international members of Insurance Ireland, the sector’s umbrella body, while domestic firms wrote €15.8 billion for this market. We should be careful what we wish for.

Twitter: @CiaranHancock1