Address by Mr. Noel Treacy, T.D.,Minister for Science, Technology and Commerceat the Irish Brokers Association Dinner, Berekely Court Hotel, Dublin 4on 26th October, 2000 at 8.00 pm.

I would like to thank the Irish Brokers Association for once again inviting me to address you all here this evening. I have good memories of last year’s event and only hope that this evening’s event is equally as enjoyable.

The IBA continues to play a very important role in representing its members in a very professional manner on insurance matters generally. The results of consultations with the IBA and with other interested parties will soon see changes in the way that the Insurance Industry operates. When I spoke about the then imminent Insurance Bill to you last year I would have been expecting that the Insurance Act would have been in place by the summer of this year. However, the legislative process is necessarily deliberate. This Bill is both extensive and complicated. It is important to get it right. We have made significant changes to the Bill as initiated as a result of very valuable input from the various representative bodies, including the IBA, the Consumer’s Association and, of course, from my many colleagues in Leinster House. I am confident that the Bill in its final form will achieve the objectives that I set for it originally, but in a manner which takes greater account of the business realities facing the various players in the industry.

The Insurance Bill was read in the Seanad today. Committee stage in the Seanad will be taken as early as possible next month, and should be enacted before Christmas. During the Bill’s passage the IBA have been involved at all stages representing your interests. While those interests, obviously, cannot always take precedence over other stakeholders in the insurance policy process, I can assure you that Brokers’ interests have been resolutely and courteously defended by your Association and its very vigilant officers.

I can understand that some of you may have been uneasy about changes in the way insurance intermediaries will be expected to operate as a result of the Bill. However, I am confident that once both the legislation and regulations are in place, you will see benefits in the form of enhanced consumer confidence.

I think that we must all agree that the self-regulation regime that applied to insurance intermediaries had worn thin and that it was unlikely to be acceptable to consumers for much longer. The problem is, as we know, that while the vast majority of intermediaries are responsible and upright people who want to conduct their business to the highest possible standards; there will always be one or two who let the profession down. This small minority can have a very significant negative impact on consumer confidence. Maintaining such confidence in the insurance system is of such importance to both insurers and brokers alike; that I think you will agree that an effective regulatory system is a benefit as much as a burden.

Another area of particular interest to all here present is the introduction of transparency or disclosure regulation with regard to insurance products. My view is that the consumer is entitled to the maximum amount of information to allow him or her make an informed choice in the market. So from the 1st of January 2001 I will be bringing regulations on the disclosure of information related to life products into effect. At this time I have no plans to introduce disclosure regulations for non-life products but in the future such regulations could be brought into effect if it was felt that it was in the consumers’ interest. The type of information required will be uniform so no advantage should accrue to any party and our officials will also have a role in ensuring that the new regulations are being complied with scrupulously.

The enactment of the Insurance Bill will address some of the most important consumer concerns arising in recent years about life assurance. In relation to non-life, the most persistent consumer concern is about price. I think that you can all probably imagine how frequently I receive complaints about the cost of insurance, especially motor insurance. I never attend a public meeting without hearing about this issue. My post is constantly full of representations about it. The vast majority of the complaints received by our officials are also about it. Let me say that I understand and sympathise with many of the cases made to me. I have heard of young people in rural areas who have to use a car to get to work because there is no alternative and who are paying the better part of their salary to finance the insurance and running of their car. So, I fully accept that there are very hard cases, fully deserving of any efforts that we can make to moderate insurance prices.

Is there anything that can done about it? There is no disagreement that the price of insurance is linked to the cost of claims. This among other things convinces me that there is no quick-fix solution. I think that we are all aware that, in the course of the interesting public debate about insurance prices over the past few months, some interesting ideas have been put forward. However these mostly boil down to intervention by the taxpayer. In the first place, I see no reason that the taxpayer, who, by the way, may be a pensioner paying VAT on her daily newspaper, should be expected to subsidise young drivers. In the second place, we know from all previous experience that subsidies do not reduce prices in the medium term. Instead, they provide rents at public expense to producers who do not need them. As far as I am concerned, the case against intervention by the taxpayer stands on its own merits. However, even if that were not so, EU law provides a barrier to such intervention. We might remind ourselves that the EU prohibition is designed to protect the Single Market, from which we have derived so much benefit, not least through the insurance companies based in the International Financial Services Centre, here in our Capital City.

The only other possible “quick fix” is to impose community rating in motor insurance. Can you imagine how deeply unpopular such a move would be? It would also be impractical, since we could not prevent any insurer based outside the State from offering insurance to people who are good risks at a rate below the community rate. Equally, we could not prevent such people from seeking quotes from insurers outside of this State. In any case, I am advised that EU law prevents any interference by Government in the selection of underwriting criteria or the pricing of insurance.

It is clear that, when one reflects on the matter, the only remedies for high insurance prices are long-term slow burners. The first remedy is competition. We wish to encourage as many players as possible onto our market so as to maximise competition. One of the intended benefits of my removing the cap on commissions is that some of the brokers here could invest so as to bring new insurers onto this market. Admittedly, the high cost of claims here may be something of a deterrent. There are two things that we can do in relation to the cost of claims. One is to reduce the number of claims by reducing the number of accidents. The Minister for the Environment has implemented a number of measures to this end and will introduce further measures in a new Road Traffic Bill. I hope to return to this theme, in bringing to bring to your attention a National Road Safety campaign for this weekend. Apart from road safety measures, we are also considering a programme designed to reduce workplace safety accidents and to make more humane the manner in which employers deal with employees who are injured in the workplace. I hope to bring proposals to Government, designed to reduce the cost of delivering personal injury compensation, as soon as possible. Moreover, the Motor Insurance Advisory Board is doing very valuable work and will be making recommendations to me in due course, which I will examine in a positive spirit. While I am expediting all of these initiatives, it will take time to deliver them in full. I am confident that, when delivered, they will have a noticeable effect on costs and therefore on premiums for our consumers.

As part of this long-term effort, may I revert to the National Safety’s campaign for this bank holiday weekend? My Government Colleague, Minister Robert Molloy, has initiated this campaign. The National Safety Council are inviting all motorists to switch on their headlights during daylight hours over the weekend as a gesture of solidarity in favour of road safety. You may recall that the “fly the flag” campaign during the same weekend last year resulted in a significant improvement in road safety during the month of November, 1999. I commend this campaign to you all and I hope that the motoring public will take this opportunity to be proactive in their support of road safety in Ireland. A significant lessening in the number of accidents over the already better record of last November would be the best possible result, for all of our people.

I would like to finish by once again thanking you all for the opportunity to speak to you on the occasion of your annual dinner. Once again, my thanks and best wishes to your President, Mr. Ciaran Sheridan and to your outstanding chief executive, Mr.Paul Carty. I wish your Association continued success, in all of your endeavours in the years ahead.