Wednesday, 17 April 2002
Dáil Eireann Debate
Mr. Rabbitte: I thank the Ceann Comhairle for selecting this important topic. There are three  words to describe the implications of today's MIAB report for the Minister's approach to motor insurance and indeed insurance generally: negligence, negligence, negligence. The long-awaited MIAB report challenges virtually every conviction of the Minister as it relates to motor insurance. For the five years he has been in office, the Minister has procrastinated. His reign has been characterised by inaction and paralysis. The recommendation for the personal injuries tribunal to quickly and more cheaply process claims where liability is not contested, which was recommended by the McAuley group in 1997, has not been implemented. Most of all, the Minister has been negligent in respect of his duties, the exploitation of drivers, young and old, the need for reform of the legal system as it interacts with the insurance industry and in the area of competition enforcement. The Minister's negligence in all these areas has played to one gallery only, the vested interests which profit from and thrive as a result of that negligence.
The Minister has also tried to hide information, suppress analysis and bury the interim work of the MIAB. The members of the MIAB, particularly the chairperson, deserve our thanks and congratulations for their perseverance and diligence in their research and for the clarity of their work.
To crown his negligence, the Minister this morning had the audacity in his press release accompanying publication of the MIAB report to claim authorship of that report, having valiantly striven to keep it under wraps, delay it and pour cold water on the MIAB analysis, as evidenced in his comments on the interim report which was not published and only entered the public domain as a result of a freedom of information request. He unbelievably headlined the press release, Treacy's report to spearhead moves to tackle the high cost of motor insurance –“Treacy's report” no less, not the Dowling report or the MIAB report.
The Minister, in his press release, remarked on “the credibility of the detailed analysis”. That analysis appears little different in its thrust from the analysis contained in the MIAB interim report. The Minister's response to that analysis, when the report saw the light of day as a result of an FOI request, was to justify his concealment because “there were serious deficiencies in the raw date.” He went on to talk about “flawed information”, while at the same time making clear his conviction that the insurance industry would ultimately establish its case.
Now the Minister talks of “the credibility of the detailed analysis” and observes that “The Board . . . pulls no punches in contending that vested interests and inefficiencies may collectively account for as much as half the premium paid by law-abiding motorists.” Where has the Minister been? What has he been doing in respect of these vested interests? He certainly has not been attending to the cause of exploited motorists, young and old.
The level of exploitation and profiteering evident and described in the report is truly astounding. Vested interests and inefficiencies may account collectively for as much as half the premium paid by motorists – 50 cent in the euro of every premium ends up in the pockets of vested interests or wasted in inefficiencies.
Profiteering on a vast scale is practised by insurers in relation to young female motorists. The insurers pocketed a profit of £300 per policy year from such policyholders for the period analysed by the advisory board. This compares with a profit of £16 per policy year for all policyholders over the age of 24. Young women account for almost half of all young insured drivers. This is a vast exploitation and most serious wrongdoing on the part of very large and very rich international corporations.
We now discover that even young males, whom we have been told incessantly by the industry are hugely problematic, are not so problematic. Those aged 17 to 24 with full driving licences are profitable, generating a profit per policy year of £125 for the period analysed by the board. This group represents 24% of all young policyholders aged 17 to 24. This is a smaller percentage than young women but must reflect the problems these young people have in getting cover at all, never mind at a fair and equitable price. This is exploitation. The problem group is that of young male drivers on provisional licences. I hope we will discuss that category next week.
In addition to the massive exploitation discovered by the MIAB, the board discovered – surprise, surprise – massive profit taking by insurance companies as a result. For the period analysed they are vastly more profitable – 11 times more so – than their counterparts in the UK, which Mike Kemp of the Insurance Industry Federation at lunchtime on RTE radio effectively described as an 11 year statistical quirk. It is some quirk.
It is over a year since I wrote to the Equality Authority, on 29 March 2001, requesting that the Minister fund it to conduct an inquiry into allegations of discriminatory practices based on age or gender under the Equal Status Act. Only on receipt of today's report has the Minister finally referred the issue to the Equality Authority. Despite all the harrying by me and colleagues in this House, he still has not implemented the recommendation relating to the personal injuries tribunal, now called the Personal Injuries Assessment Board. Meanwhile, young drivers have had confirmed for them today that they have indeed been ripped off by the insurance industry, but the Minister with responsibility for commerce has not implemented one reform in five years.
Mr. Treacy: I was very pleased to be able to launch the report of the MIAB earlier today. At the launch, I paid tribute to the dedication of all the members of the board and its chairperson for  completing the report. They did not have an easy task, but they persisted in their efforts and have produced a report which is the most comprehensive study and analysis of the Irish motor insurance industry ever undertaken. While the report may have taken longer to finalise than was anticipated, I am convinced that the analysis now available to us was worth waiting for. I am glad that I extended the mandate of the board last year to allow it complete its analysis of the data. The board acted with great professionalism in obtaining information and assistance from its various members.
I would like to draw the attention of the House to 11 findings in the report. First, motor insurance premiums in Ireland comprise 1.6% of GDP. Second, litigation costs – legal and expert fees – add 40% to every €1 paid in compensation for injury sustained in motor accidents. Third, motor insurers in Ireland reported 11 times the total post-tax profit earned by their UK counterparts between 1983 and 1999. Fourth, young male drivers aged 17 to 20 years on provisional licences produce very substantial insurance losses – they are involved in many accidents, resulting in the most serious of claims, at a frequency which is disproportionate to their representation as policyholders. Fifth, charges for young female policyholders are not justified by their claims costs and these policyholders have been described by insurers as “subsidisers”.
Sixth, the board has also registered particular concern about the position of senior citizens and those managing disabilities. Seventh, the consequences of uninsured driving are becoming more acute, with the Motor Insurance Bureau of Ireland estimating that they add 8% annually to the costs of claims in the aggregate motor insurance market. Eighth, not all claims ultimately involve outlay – for all types of insurance cover in the years 1997 to 1999, 29% of claims were finalised at zero outlay. Of the cases involving outlay, only 4% of accidents were valued at over £30,000 and 80% were valued below £5,000. Ninth, the market for private motor insurance is not competitive, a situation which is compounded by the fact that motor insurance is compulsory, thereby limiting the usual market forces dictated by consumers. The level of mergers has reduced some 17 separate motor insurers in 1993 to just five companies in 2001, some of which operate under various product images without their identity being apparent to consumers. Tenth, vested interests and inefficiencies may collectively account for as much as half the premium paid by the law-abiding motorist and, eleventh, a ground-breaking role is foreseen for the new Irish Financial Services Regulatory Authority – IFSRA – within which a statutory office of insurance ombudsman will be established.
I also draw Members' attention to a document entitled Annotated Version of the Recommendations – of the MIAB – which is available from the Department. This document extracts the 67 recommendations from the report and, in the case  of each recommendation, indicates the issues which it addresses and those responsible for its implementation. We are now moving from the analysis stage to the implementation stage. On my recommendation, the Government has agreed to establish a high level implementation group to immediately progress the recommendations in the report. It will comprise representatives of various Government Departments, the Consumer Association of Ireland, IBEC, IFSRA and the chairperson of the MIAB.
Mr. Treacy: There will be an implementation group. I will give Deputy Flanagan an opportunity to speak on it next week. There will be no delay in preparing an action plan for implementation. The Government has mandated me to set up the high level group and this is already under way. The group will report back to Government within three months. It is clear, therefore, that the Government is very supportive of the broad thrust of the recommendations from the MIAB.
I have also been mandated by the Government to refer the report to both the Competition Authority and the Equality Authority, which I have already done today to allow them take any necessary action on the report. In addition, we are extending the remit of the MIAB up to the end of this year so that it can monitor and report to us on progress on its recommendations.
I stand over my record of appointing a motor insurance advisory board of 20 people, who have done an outstanding job, unlike my predecessor. I regard his utterances as the utmost hypocrisy. He sat in office before me and never once had a meeting with the MIAB, never took on any vested interest or took any action whatsoever. Now he sheds crocodile tears for the people of Ireland. Is it any wonder that the people are cynical when they listen to the utterances of a man who has fabricated in this House on many issues over many years?
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