The Minister for Finance, Michael Noonan TD and Minister of State for Financial Services, Eoghan Murphy TD yesterday presented the Cost of Insurance Working Group’s Report on the Cost of Motor Insurance to Government.
The comprehensive report on motor insurance recommends numerous reforms for the sector and sets out an action plan for their implementation. It aims for greater stability in pricing while acknowledging the requirement for a financially stable insurance sector.
Deadlines for implementing the 71 action points range from the first quarter of 2017 to the fourth quarter 2018.
The report highlights how Irish insurance industry underwriting results have swung from significant profits in the 2005-2007 period to significant losses in 2013-2015. It acknowledges that the current low interest rate environment is materially affecting the levels of interest or investment income that insurers can earn, which has contributed to the difficulties they have faced over the last number of years.
It details all the factors contributing to the recent losses, namely - under-pricing, increased frequency and cost of settled claims and increases in reserving levels.
The action plan sets out 71 recommendations across six key objectives:
1. Protecting the consumer
2. Improving data availability
3. Improving the Personal Injuries claims environment
4. Reducing the costs in the claims process
5. Reducing insurance fraud and uninsured driving
6. Promoting road safety and reducing collisions
Key specific recommendations include that insurers should set out the reasons for large increases in premiums to provide transparency to consumers, that a National Claims Information Database should be established (albeit this would be ‘high level’ as opposed to ‘case-by-case’ – at least in the near term) by the Central Bank, that the Department of Finance should publish quarterly aggregated metrics on claims costs and trends within the market, that a Personal Injuries Commission should be established and that the Book of Quantum should be improved with more judicial involvement.
Commenting on the report, Minister of State, Eoghan Murphy said, "“There is no silver bullet to reduce the cost of insurance, insofar as no one recommendation will solve the problem on its own. However, cooperation and commitment between all bodies and individuals with a stake in a stable and accessible insurance market can deliver fairer premiums for consumers without unnecessary delay.”
Davy Stockbrokers today indicated that the implementation of the proposed reforms is broadly supportive of this trend, although the increased transparency and scrutiny of pricing in the market is likely to exert pressure on insurers to pass a share of benefits accruing onto consumers.