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INSURANCE IRELAND DINNER BRIEFING FOR THE MINISTER FOR TRANSPORT, TOURISM & SPORT Tuesday 29" September 2015 BRIEFING MATERIAL DTTAS ROLE IN MOTOR INSURANCE. * The role of the Department of Transport, Tourism and Sport with regard to motor insurance relates primarily to the legal requirement that under the Road Traffic Acts third party insurance is in place to drive a motor vehicle in a public place. ¢ DTTAS has no role in the regulation of insurance, which is a matter for the Department of Finance and the Central Bank. COST OF MOTOR INSURANCE : CSO figures * CSO statistics on the cost of motor insurance show that, as at August 2015, motor car insurance has increased by 24% by comparison with August 2014. ¢ The cost of motor insurance remains 6% below the prevailing level in 2003 (The establishment of the Injuries Board in 2003, anti-fraud measures in the DiJustice & Equality’s Civil Liabilities and Courts Act 2004 and improved road safety all contributed to this reduction). MOTOR INSURERS POSITION ON COSTS Motor insurers have been making a case for the increased cost of insurance in Ireland. They cite the excessive cost of claims in Ireland. * They also cite the cost of whiplash claims in Ireland which they say cost €10,000 more per claim here compared to the UK. INJURIES BOARD (D/JEI area of responsibility) * The insurers state that ‘the average motor injury award made by the Injuries Board is very high at approximately €21,000. Also, more than 90% of claimants to the Injuries Board are represented by solicitors even though the Injuries Board was meant to be a lawyer free zone. Approximately 40% of Injuries Board awards are rejected by claimants partly because some solicitors adopt a policy of non-cooperation, for example claimants not turning up for medicals or not supplying loss of earnings information so that the Injuries Board cannot make informed awards. The consequence of this is that following the inevitable rejection of the award, the case is subsequently litigated, generating additional legal costs” © The Injuries Board in its Mid-year review 2015 of 8 September 2015 review paints a somewhat different picture. That review state that the recent trends in claim volumes and processing costs include: * Many consumers have experienced double digit increases in the price of their insurance this year. The reasons cited by the insurance sector are underpricing, under-reserving, the impact of long expected Solvency Il requirements, fall in investment income, fraud, increased awards as a result of the change in jurisdictions of the Courts, and increases in claims volumes and the cost of settling claims. + According to verifiable data from the Courts Services, the number of personal injury claims initiated through the Courts dropped in 2014 for the first time in seven years (-26% in the High Court; +16% in the Circuit Court). The number of awards also dropped to 1,527 in 2014 (2013: 1,699). » Data from the Injuries Board indicates a modest 8% increase in new claims over the past 18 months. * Inthe decade since the Board’s establishment, 70% of personal injury claims are no longer litigated * Maurice Priestly, Interim CEO of the injuries Board stated on 8/9/15 “It is not surprising that there has been a modest increase in claims volumes year to date given the general economic upturn with more people at work and a lot more vehicles on the road. Greater economic activity would be expected to generate greater numbers of policies and premium income for insurers. However, what we are seeing are insurance premia increases in the region of 20% and further clarity is needed on the precise cause of increases of this scale.” Mr Priestly stated that “Our data on claim volumes and the cost of processing claims is at odds with the scale of premium increases taking place in the market, Insurance companies and claimants have benefitted from the visibility Of the Injuries Board model which has facilitated early settiements and/or low cost claims resolution. The Board continues to deliver savings which has fed into the cost of insurance. Not only that our delivery costs are at historically low levels.” * Mr Priestly added that “If itis costing insurers more to process personal injury claims, due to influences outside of our model, or if there are systemic issues at play such as claims inflation or the re-emergence of third party costs, this needs to be brought into the public domain. The first step to addressing any such issues is to have all relevant information available so any problems can be understood. We strenuously reiterate our call for insurance data sharing and greater transparency in the interests of consumers and wider society’ concluded Mr. Priestley UNDERWRITING CYCLE OF MOTOR INSURERS IN IRELAND © It appears that motor insurers are now imposing higher premium rates to retum themselves to profitability or to boost profitability after a number of years of insurers competing for market share with prices driven down accordingly and possible underwriting losses in some cases. The question does arise for motor insurers - If motor insurance is so unprofitable, why does anybody do it? MOTOR INSURANCE PRACTICES, e.g., older vehicles * Motor insurers are being selective about the policies they issue, avoiding quoting for new policies, e.g,, for older vehicles, which is creating problems for the owners of older vehicles, the private ownership of small commercial Vehicles, motorcyclists and other groups. © The current position where motor insurers refuse to quote for certain business Tuns somewhat counter to the spirit of the Road Traffic Acts (The Declined Cases Agreement operated by Insurance Ireland, is of some assistance in dealing with such cases) . It inhibts the State's requirement for basic level of compulsory insurance to be in place, and it frustrates customers seeking transparent affordable motor insurance. UNINSURED DRIVING ~ WHAT THE INSURANCE INDUSTRY CAN DO. * Motor insurers are quick to cite uninsured driving as one of the problems for the industry. However, funding and establishing a properly functioning motor insurance database (as has been done by the Motor Insurers’ Bureau in the UK, with the support of the industry there), combined with increased enforcement by An Garda Siochana, following its establishment, could go a fong way towards reducing the level of uninsured driving in Ireland, which costs the industry and insured drivers here €60 million approximately per annum. REGULATION * The Central Bank, as Financial Services Regulator is responsible for the regulation of Insurance Companies The Insurance Compensation Fund was designed to compensate the victims of insolvent insurance companies in the Non-Life (including motor insurance) sector, * The Motor Insurance Bureau of Ireland’s job is to compensate the uninsured victims of motor accidents ¢ Preparation for compensation payments from the Insurance Compensation Fund (ICF) were at an advanced stage prior to the taking of the recent High Court action, Department of Finance had publicly committed to reviewing what led to the collapse, and to look again at the Insurance Compensation Fund framework that is in place to assist policyholders and claimants Payments from the ICF are currently subject to the limit of 65% of the amount due or €825,000, whichever is the lesser unlike the equivalent Fund in the UK which is not similarly limited. © There is no doubt that the ICF 65% limits on payments taken together with the fact that MIBI payments are not subject to a percentage of claim limit, made the MIBI more attractive to litigants as a payor for Setanta claims, particularly in the light of the information that the liquidator provided to the Oireachtas Committee earlier this year that he might only be able to pay out in the region of 30% of Setanta claims. ¢ The Department has initiated an engagement with the Department of Finance ‘on the matter of the correct framework for any future insolvencies in the motor insurance sector.