merrion street

Introduction
The Irish insurance sector has been subject to a lot of volatility in recent years.
Just look at the inflation data:
insurance prices have increased by 56 per cent since January 2011;
motor insurance prices have increased by 66 per cent over the same period
and by 25 per cent in the twelve months to September 2016.
These kinds of increases – these so-called “super-cycle” trends – are very damaging to the economy. They hit consumers hard, and they undermine competitiveness.
More than that – on an individual, a personal level, we are at a key moment in our macro-economic cycle: coming out of a recession we are now in a position to reduce the heavy burden of taxation, albeit modestly, and employees are seeing modest restoration of their wages from the crisis cuts – but these are potentially being eroded by sharp increases in insurance premiums – in motor premiums in particular.
That’s unacceptable. And that’s why the future of insurance in Ireland must be anchored in reform of those sectors that make up our insurance environment. It’s not just the industry (the companies) that we have to look at – there are a number of moving pieces here.
Reform
The future for insurance in Ireland must have certainty, clarity and transparency at its core.
That should deliver stability for the industry, fairness for the customer, and consistency for the claims environment.
Because right now customers don’t believe they are getting a fair deal. I know that the industry doesn’t believe it is bearing fair costs – or even, in some cases, quantifiable costs. The industry has made losses. And our claims environment (our culture), is out of joint.
There is a lack of transparency in our insurance sector when we look at our nearest neighbours – I’m tired of hearing that we are different, or that this is just how things are. The operation of our market needs to grow up.
There is also a claims culture in this country when it comes to minor injuries, and I think we have to face up to that too. We cannot continue to be outliers here.
The vast majority of us are in the middle and we are bearing the costs. That needs to change and to change quickly.
Cost of Insurance Working Group
For all these reasons, Michael Noonan set up a Task Force to look at the insurance sector earlier this year. I was asked to Chair a Working Group under this Task Force to examine the various factors contributing to the increasing cost of insurance.
We began our work in June. In July we decided that our initial focus should be on motor insurance given the wider impact it has on the country, and because in the general basket of consumer goods it is for the vast majority a necessity. In October I provided a list of emerging recommendations to the Minister for Finance. And our plan is to publish a report in December of this year.
In January we will then turn our attention to other areas of non-life insurance. Though it should be noted that much of the work we are doing now will not just be relevant to the future of motor insurance.
Consensus approach
The working group brings together the relevant stakeholders on the Government side: Departments, PIAB, State Claims, Central Bank.
Every week its members have been engaging with stakeholders in the industry to understand the market, to examine the data, to interrogate the cost of claims, to look at the impact of fraud and other issues.
From a political point of view, it is important that we achieve consensus in terms of where we want to go and what we want to achieve. There is no point in the government going off in one direction if the main stakeholders are not going to follow it.
But that’s not an easy task – because, as we have all been hearing for months now – there isn’t necessarily consensus around the problems.
Well I think it’s time for the blame game to end.
Political consensus amongst the different parties and members in the Oireachtas is also key. The new political arrangement gives the Oireachtas more of a say in decision making and that is welcome. The Government doesn’t have a monopoly on wisdom and I believe we can all work very well together in this area – particularly in this area – given the demand from citizens for solutions.
There is the potential to make a political football of this issue but no one has to date as I think everyone recognises this would be to no one’s benefit. The work of the Finance Committee in its public hearings has been very welcome.
Emerging Recommendations
The emerging recommendations have not yet been made publicly available, because they are not settled policy yet, but also because I don’t believe they should be published until they have been debated in the Finance Committee and we have had input from the Committee’s own work.
But to give you a flavour of what they point to:
The emerging recommendations touch broadly upon 9 areas and between high level and lower level contain about 40 actions.
One area relates to consumer protection. It seems clear to me that we need better and more pro-active information on the part of insurance companies when quoting for insurance or renewing insurance. Information around how a person’s premium has been calculated, the reasons behind changes year-on-year, and so forth. There is a host of well documented consumer issues which the emerging recommendation speak to.
We need to quickly enhance transparency around the claims environment, and enable the use of data sharing and collection that we see in other jurisdictions. Perhaps it is a database, perhaps it is a national register. But a resource is needed for the sector so we can see what claims are being made against property or for personal injuries, and see how those claims were resolved. This happens elsewhere and it should happen here.
Significant concerns have been raised around the uncertainty of the claims process, the cost of the claims process and the method for making awards for personal injuries. Some of you might have seen reports yesterday that the Working Group is recommending the establishment of some type of commission to look at those areas that speak directly to the cost of personal injuries. This is the case.
This Commission will be up and running as soon as possible and will work alongside the ongoing reform of the Book of Quantum and the Personal Injuries Assessment Board. Its terms of reference have yet to be finalised but we have already scoped out the priority areas for it to look at.
Other recommendations that are emerging speak to the use of technology to tackle fraud, uninsured driving, to increase the use of telematics and to improve data sharing around suspected fraud. Of course, where there is a financial incentive to commit fraud, fraud will continue, and ultimately this will have to be addressed to.
Next Steps
Since providing these emerging recommendations to the Minster, the Working Group has been developing priority actions and a detailed timeline for implementation. We won’t be able to make all the changes that we believe we need to make overnight – but we can put in place a detailed action plan to give certainty to everyone as to where the Government intends to go and how we all can get there.
The Future and Costs
It would be grossly misleading of me to state that these measures once published will see your or my insurance premium begin to fall. Given the complexity of motor insurance and its many moving parts and actors it goes without saying that there is no policy or legislative silver bullet to immediately stem or reverse price rises.
We can’t set the price of a premium. This needs to be done by the insurer based on perceived risk. We cannot set the award level for a claim. This responsibility falls to the judiciary.
But we can introduce reforms that will speak the many factors that contribute to the costs of premiums. In showing our determination and our detailed planning to tackle and reform these factors, we hope it will give comfort and certainty to the various stakeholders, from consumer to industry, as to the intentions of the government.
I hope this will settle the current uncertainty we are seeing around premium prices. As the recommendations work their way through, I believe we will then see a sustainable reduction to more appropriate insurance premium prices.
We won’t be going back to where we were a few years ago – those cheap prices clearly were not sustainable. But we have to move away from a situation where some drivers are seeing 25% increases in their premiums even though there has been absolutely no change in their driver behaviour, and where others are not able to get affordable insurance at all.
We can achieve that for the customer, while also protecting the stability of the insurance market and ensuring that it’s a market worth being in.
Thank you.