Motor insurance settlements lack transparency, Minister says

A lack of transparency in relation to settlements of motor insurance claims makes it difficult to corroborate explanations given by the industry for increased insurance premiums, Minister of State for Financial Services Eoghan Murphy has said.

Mr Murphy made the comments while addressing the Oireachtas Committee on Finance, Public Expenditure and Reform on Wednesday on his work with the Cost of Insurance Working Group.

The group was established in July in the wake of mounting concern at increases of 40 per cent and greater in insurance premiums and will present an interim report to Minister for Finance Michael Noonan in October.

The group brings together a number of Government departments and other bodies, including the Personal Injury Assessment Board and the Central Bank.

The working group is expected “to identify and examine the drivers of the cost of insurance, with particular focus on motor insurance, and to recommend short-, medium- and longer-term measures to address the issue of increasing insurance costs, taking account of the requirement for an economically vibrant and financially stable insurance sector”.

It will examine issues such as market factors, the effects of legal costs and litigation processes on insurance costs, claims compensation arrangements and the cost of claims, insurance data and information and the impact of accident rates.

The role of the Central Bank as regulator will also be examined.

Four subgroups will review the issues in detail.

"A number of specific issues are reported to be contributing to the increasing cost of car insurance in Ireland, " Mr Murphy said.

“Industry, for instance, argue that excessive award levels, increased number of claims and excessive legal costs are significant contributory factors.

“However, because of a lack of transparency in the final settlements, it is difficult to corroborate these industry arguments.

“The only thing which we can all definitely say, however, is that motor insurance costs have increased significantly in the year to July 2016.”

Minimise risks

Mr Murphy said that in developing solutions to the issue they had to be “very conscious of the need for a stable insurance sector and ensure that risks to policyholders and the wider financial system are minimised”.

He also said that one of the major shortcomings with existing settlement arrangements was the lack of transparency around the cost of settling claims or awards in personal injuries cases that do not go through the courts or the Injuries Board.

Other issues to be addressed include the lack of a link between the National Car Test and the availability of insurance, insurance costs for the young and those aged over 65 and the provision of car insurance at a reasonable cost to rural dwellers with no public transport.

Mr Murphy said he was keen to come up with “credible solutions” to address the problem of the increasing costs of motor insurance, with a view to implementing them as soon as possible.

He said it had to be remembered, however, that the ability of the Government to influence insurance pricing was limited, as insurance companies were required by European law to price in accordance with risk.

Committee chairman John McGuinness of Fianna Fáil said it was "infuriating" that as the committee was discussing the issue, the whole insurance industry was "moving as fast as it can towards higher premiums" so that it could work from an "increased base".

“They should be warned about it,” he said.