Tánaiste meets UK insurers

Objective of the Reform Programme

The Reform Programme seeks to bring about a reduction in insurance costs by the insurance industry, for the benefit of consumers and business, by means of:

• Improving the functioning of the insurance market;
• Decreasing the cost of delivery of compensation; and
• Investigating the competitiveness of the market.

A Ministerial-level Committee, comprised of the Tánaiste and Minister for Enterprise, Trade and Employment (Chair), the Minister for Transport and the Minister for Justice, Equality & Law Reform, as well as the Chairperson of the Motor Insurance Advisory Board has overseen the implementation of the Reform Programme.

Implementation of the Motor Insurance Advisory Board (MIAB) Action Plan

Significant progress has been achieved in implementing the key recommendations contained in the MIAB Report. Thirty-eight of the recommendations have already been implemented. A number of others are due to be implemented very shortly with a substantial proportion of the rest either partly implemented or progressing. A number of key actions are highlighted in the following paragraphs.

Road Safety

The Minister for Transport has introduced penalty points for speeding offences, for not having insurance, for not wearing seat belts and more recently for careless driving. Road traffic accident levels have decreased significantly since the introduction of penalty points. Further measures dealing with both learner and uninsured drivers are underway and a new Road Safety Strategy will be published shortly. A Road Traffic Bill was published on 11 June 2004 and will be discussed in the Oireachtas in the Autumn.

Judicial Issues

The Minister for Justice, Equality & Law Reform has brought forward the Civil Liability and Courts Bill to deal with fraudulent and exaggerated personal injury claims, to reform the law on personal injury actions, and to reduce the statute of limitations to two years. This legislation has passed all stages in the Dail 7 Seanad and is due to be enacted shortly. The legislation includes measures such as

• Reduction in Statute of Limitations from 3 years to 2 years
• Requirement of plaintiff to issue letter of claim within 2 months of accident or possibly be penalised on payment of costs
• Outline of what a summons should include – i.e. full statement of claim including details of injuries, accident and financial loss claimed
• What shall be specified in a defence of a claim and/or a counterclaim
• Requirement for a verifying affidavit to accompany a personal injury claim
• Creation of an offence for giving false or misleading information in affidavit
• Power of court to direct parties to a mediation conference
• Facility for lodging final offers
• Power of court to direct parties to a pre-trial hearing
• Requirement of court to have regard to Book of Quantum
• Power of Minister to prescribe actuarial tables
• Creation of offence of giving false or misleading evidence
• Exclusion of black economy earnings from any award
• Establishment of a register of personal injuries actions
• Amendment of the PIAB Act to give Board power to request information for the purpose of it exercising certain powers (i.e. request certain information from the Taxing Master); there is also a technical amendment to deal with counterclaims – on advice of AG’s Office.

Establishment of the Personal Injuries Assessment Board (PIAB)

The Personal Injuries Assessment Board was established on 13^th April 2004. From 1 June 2004 all personal injury claims arising from workplace accidents (where employee is seeking compensation from his/her employee) must be referred to PIAB before legal proceedings are initiated. The intention is that the PIAB will commence dealing with public liability and motor insurance claims shortly. By eliminating the need for litigation costs where legal issues are not in dispute, the PIAB will significantly reduce the cost of delivering compensation.

A Book of Quantum which is essential for the successful operation of the PIAB was published on 2^nd June 2004. This shows for serious injuries, the ranges of compensation to which people may be entitled in addition to financial losses such as wages and medical expenses. The guide will enable people to satisfy themselves that forthcoming awards made by PIAB are in accordance with current levels of compensation as reflected in the Book of Quantum. It will also encourage negotiated settlements.

Competition Authority study on Competition in the Insurance Sector

This study aims to identify anti-competitive practices or other constraints on competition in the non-life insurance market in Ireland, with particular reference to motor insurance, employers’ liability and public liability insurance. It aims to make recommendations to ensure that competition works well for consumers in the Irish market. It also makes recommendations for changes in the case of problems identified at EU level. The bulk of the study was completed in 2003 and a Preliminary Report and Consultation Document on Competition Issues in the Non-Life Insurance Market was published on the 18^th February 2004. Following consultation, a final report will be published later in the year which will contain recommendations based on the findings.

The Irish Insurance Federation (IIF) have produced a joint code of practice with IBEC in relation to handling of claims. This code comprises guidelines designed to help commercial policyholders and their insurers to improve communication and understanding as to how insurance arrangements especially the handling of personal injury claims will be dealt with. The IIF have incorporated a number of important MIAB recommendations in relation to insurance providers in a code of practice. These recommendations deal with issues such as equality, transparency and information for consumers.

Changes have been made in the Law Society’s Rules regarding “no foal-no fee” advertising by solicitors.

• One stop website went live on 26^th November 2003
• IFSRA Code of practice published during December 2003.
• Comparative tables showing motor insurance quotations first published on 10^th December 2003.

Impact on Cost Reductions

The measures outlined above are having a very positive impact on costs and on the functioning of the insurance market. As many of the initiatives now in place will impact costs in the future a positive trend is anticipated going forward.

The CSO monthly indices show that there was a reduction of 14.1 index points (13.1%) in motor car insurance between the months of May 2003 and May 2004. A recent survey of motoring costs published by the Automobile Association shows an average 22pc fall in motor premiums over the previous 12 months.

Data obtained by the MIAB in its quarterly surveys shows significant decreases in motor insurance premia over the past 12 months. For example, the data provided by MIAB for 3 specific companies between March 2003 and March 2004, indicates the following reductions:

• 10% to 15.6% in comprehensive insurance for a 30 year old male,
• 10% to 41% in comprehensive insurance for a 50 year old female,
• 10% to 44.6% for third party, fire & theft insurance for a 21 year old male.

Anecdotal evidence supplied by representative groups suggests that other liability premia are also falling. Premia levels will in future be monitored on an ongoing basis by IFSRA and reliable longitudinal data will be available.

In addition, the measures outlined have lead to a better functioning insurance market. The Irish Insurance Federation (IIF) recently revealed that the 20 non-life insurance companies operating in the Irish market made a combined operating profit of €747m in 2003. While insurers profitability has led to reductions in insurance premia it also enhances the attractiveness of the market to prospective new entrants.

A number of new entrants in the motor and liability areas are now authorised to operate on a freedom of services basis in Ireland, for example Brit Insurance and ARB Underwriting. In addition, a number of companies have applied for authorisation to locate in Ireland.

ENDS/ETE 1243