Dáil Éireann - Volume 324 - 20 November, 1980

Adjournment Debate. - Motor Insurance Increase.

[1020] Mr. B. Desmond: I wish to thank the Chair for allowing me to raise this matter on the Adjournment. The main purpose is to suggest to the House that the manner and content of the announcement of this increase by the PMPA warrants an inquiry, perhaps even a public inquiry. During the years the practice has been that where a company applies to the Government for an increase, particularly where it is obligatory to bring it before the National Prices Commission, the report of the commission has been published and the Government have appended to the report the reasons for allowing such an increase. To date there has been no such report published and there has been no indication why the increase has been sanctioned. The only reason I can find is that some directors of the board happen to be prominent supporters of the Fianna Fáil Party but that is not a good reason for sanctioning a price increase.

The NPC reports for August and September 1980 have not been published and it is indeed outrageous that their publication has been delayed. It is well known that some of the directors of the board of the PMPA were very busy in December 1979 touring the country campaigning for the election of the Taoiseach rather than looking after their own business. They were very busy at that time twisting the arms of Ministers of State and Deputies in favour of one person and that is well documented.

There should be a public inquiry into this bland announcement by the PMPA. That company got increases from 35 per cent to 50 per cent from 1 March 1978 and by any standard these were massive increases. Then, back they came and, apparently, they had no great difficulty in convincing the Government that they were entitled to another increase of between 26 per cent and 30 per cent from 1 September 1979. Again, even taking inflation into account that was an increase of massive proportions. Back again come the PMPA and, apparently without comment, [1021] sub rosa, with no explanation and no NPC report, they are given an increase of 24 per cent from 1 December.

I notice an interesting comment in relation to this matter in the Evening Press of today's date where it states that in addition to the 24 per cent premium increase motorists who are comprehensively insured with PMPA will have to pay the first £25 of any claim. Is that true? If it is true, then it is a myth to think that one is comprehensively insured with PMPA. There are 400,000 motorists, more than half the motor car owners, about six out of every ten, who would like to know now, courtesy of Dáil Éireann, if they are liable for the first £25 if they have an accident. Apparently they are liable. We do not know what has been sanctioned by the Government.

PMPA maintain that other insurance companies have got increases but that is a rather lame excuse when one considers that for practical purposes they have the monopoly of motor vehicle insurance premiums in the Republic. It would be interesting to see the precise increases granted from 1 March 1978, while comparing the PMPA with the other 12 insurance companies. However, we do not have that data. That is why I think we need a short, sharp, vigorous inquiry into the PMPA.

I do not hold anything against the company as such. I do not hold it against the company that some of the members of the board have rather obvious political predilections in one direction. That does not particularly interest me. It is only when they spend their time more preoccupied in that direction to the detriment of the motorists who are insured with them that I get rather perturbed.

Mr. L'Estrange: Hear, hear.

Mr. B. Desmond: Apparently without much difficulty this company can purchase printing firms, newspapers, departmental stores and can get involved in oil and petrol distribution.

Mr. L'Estrange: At the expense of the motorist.

[1022] Mr. B. Desmond: The company can indulge in property and office speculation and apparently they have got a substantial profit from being so involved. I should like to quote from a report by John Stanley in The Irish Times of today's date as follows:

At present the PMPA can only handle about a third of the crash repairs for which it is paying.

There is efficiency for you. The company are more preoccupied in running the Leinster Express or buying out The Sunday Journal than in trying to cut the cost of repairs for people insured with them. Therefore, I take an entirely jaundiced view of the decision of the Government to sanction the increase. In fact, I think the House should censure in the strongest possible manner the Minister for Industry, Commerce and Tourism and his Cabinet colleagues for the way this announcement was brought to the attention of the motoring public. The Minister disappears on matters of national importance, presumably to Australia, but the fact remains that a report was not issued. Presumably there was a letter from the Department to the PMPA indicating that sanction was given. Why was it not published? Dáil Éireann and 400,000 motorists have a right to know what is going on between a Government Department and one of the major commercial insurance organisations. I recall well the former Minister, Senator Justin Keating, being savagely berated by the then shadow Minister, Deputy Desmond O'Malley, when he delayed perhaps two or three weeks because of pressure of Government business, trying to get sanction through, in publishing an NPC report. Yet such were the exigencies of the Donegal by-election and the several thousand voters in the Donegal area who are policy holders with the PMPA——

Mr. L'Estrange: They would be lost in the potholes there.

Mr. B. Desmond: ——that the reports of the NPC for August and September could not be published and presumably the [1023] October report is still being considered by the Government.

This House is entitled to feel irate about the situation. It would require a great deal of inquiry on the part of the Government Department really to access in a detailed actuarial manner the true financial state of that company particularly in relation to alleged losses on claims and the extent to which the company have fulfilled what one might call their statutory obligations. I notice in an article in The Irish Times today entitled “PMPA Profits Rise 28 per cent in First Half” a statement to the effect that the latest accounts do not include the trading performance of the PMPA's other activities. Interestingly enough that statement is made. Yet apparently there is no problem in sanctioning increases of 24 per cent.

Mr. L'Estrange: Without the facts.

Mr. B. Desmond: The Labour Party have tabled a number of motions in this House relating to this matter over the years. We hold the view strongly that it is time the motorists of this country, who have to pay for motor insurance, demanded of the Government that the whole question of motor insurance should not be left exclusively and entirely in the hands of one virtually monopolist company and about eight or ten other companies who, by and large, cater for motor insurance. We on this side of the House firmly believe that, just like the VHI or any other aspect of social insurance, motor insurance is as important and of such consequence that an organisation of such efficiency should be set up. The PMPA allege that they are losing so many millions on motor insurance, and here I might quote the precise figures relating to underwriting loss also contained in the same Irish Times article, of £1.985 million in June 1980 and in 1979, £1.456 million. One must ask the question: if the company are so preoccupied with alleged continual losses on [1024] underwriting why are they so hostile, why do they get into such an enormous political tizzy particularly when individuals like myself speak? I will probably feature long and earnestly in the next publication of their various magazines. Why do they get into such a tizzy when we suggest that to relieve them of this great loss-making problem on underwriting there should be established a State-sponsored body like the VHI? I would even make the managing director of the PMPA chairman of that Motor Insurance State-sponsored body. That perhaps would fulfil the real purpose for which that body were set up originally — apparently private motorist protection, how are you.

Therefore, we think there is a solid case for a total reorganisation of the whole system of motor insurance in this State. We believe there should be a supervised system of motor insurance to deal with the equitable size of premiums. We believe that the system of processing claims is chaotic. We would point out that, after some three and a half years in office, the Government have failed to institute any reforms in the present jury system on the level of awards. That is a clear indication on the part of the Government that they were preoccupied with this matter but they have done absolutely nothing about it. Therefore I want to lodge my protest this evening. I am sure Deputy L'Estrange wants a few minutes also——

Mr. L'Estrange: No.

Mr. B. Desmond: I want strongly to lodge my protest about the manner in which this increase has been announced, about the total discourtesy shown to Deputies in that no official departmental comment has yet been made. It has had to be wrung out of the Government by way of an Adjournment Debate here this afternoon. Putting it crudely, if the electorate of Donegal and the remainder of the electorate want to vote for that kind of performance — if I may put it that way — if they want to pay for it out of their pockets, jolly good luck to them if that is [1025] the way they want to see the country run. If they want to see their motor vehicles insured in that way, that is their privilege. But we feel it should not be that way and that we are entitled to lodge a very strong and vehement protest in relation to this unwarranted, unjustified increase of such magnitude.

Minister of State at the Department of Industry, Commerce and Tourism (Mr. Meaney): I have listened to the case made by Deputy Desmond which is in the main a vindictive, personal one. Being a good friend of mine I was shocked at the little knowledge the Deputy had about how the prices commission work. I am doubly shocked at his insinuations that that group of people are not conducting their business in a proper manner. I can assure him that certainly they are.

I will deal with as many of the points the Deputy raised as I can and also make a general statement. The fact that the

Minister has to authorise increases in motor insurance premium rates is a matter which gives him very great concern because of the effect such increases can have on household budgets through the cost of insurance to the motoring public. The Government are, of course, concerned that any increase in this, a compulsory class of insurance, contributes to the rate of inflation. But the hard fact remains that it is essential that the premiums paid to provide a service must be adequate to meet the costs of providing that same service. Insurance companies must be allowed to charge premium rates which will enable them to meet the cost of claims which arise on the cover issued and allow a contribution to the reserves which are statutorily necessary for insurers to put aside. I want to stress very strongly that it is statutory to have reserves which must be put aside by all insurers.

The crucial point to make in regard to the size of increases granted is the inescapable fact that the justification for the size of the increases rests essentially, as it always has done, on the ever increasing cost of claims. For most companies claims [1026] costs continue to rise at rates higher than the consumer price index. Applications for increases made to my Department are examined on the basis of substantiated claims cost figures which each applicant is required to furnish. These figures are examined on a rigorous basis together with each company's own internal expenses and commission rates. The claims projections which each company makes for the next few years are analysed in great detail and I can say that in all cases the projections used by the Department are more conservative estimates than those submitted by the companies.

The premium increases which are granted are designed to cover the full projected cost of claims to final settlement even where this may not be made for several years ahead. Some allowance must be made on these projections for increasing claims frequency which are a reflection of accident rates. The purpose in any price increase granted is simply to allow each company to break even on its underwriting account so that the cost of providing motor insurance will pay for itself.

In the press this morning it was reported that most motor insurance premiums in Ireland have risen by 407 per cent in the last ten years. What was omitted from such reports was the fact that claims paid by motor insurers have increased almost six-fold from £9 million in 1970 to over £53 million in 1979. Motor insurance companies themselves have continued to make large underwriting losses on their motor account in the five years to 1978. The total underwriting losses in this period of five leading insurers representing in excess of 75 per cent of the motor insurance market have totalled £7.3 million. In 1979 alone the loss made on motor insurance overall was £5.1 million. These figures speak for themselves. Losses have been such that some insurers have been forced to abandon motor insurance completely.

In analysing the PMPA price increase application the Minister was concerned that the proposal was to load the increases sought on to the basic third [1027] party element of the portfolio with corresponding smaller increases on the comprehensive and fire and theft elements. This was despite the fact that the switch-over to comprehensive by a substantial number of PMPA policyholders had given rise to a very increased frequency of claims which followed this change. For this reason the company were required to bring their comprehensive and fire and theft rates up to more realistic levels and to abate the increases on the basic third party element. As a result the increases on comprehensive and fire and theft which PMPA are applying from 1 December are higher than those on basic third party. These increases have, of course, also been subject to the scrutiny of the NPC and as Deputies will be aware the company applied for just under 30 per cent and they were allowed 24 per cent on average.

Much comment has been made on the PMPA's profits just announced for the first six months of 1980. These profits, net of tax, amount to £800,000 on a premium income of £27.5 million a profit rate of 3 per cent — hardly a startling figure. In the examination of the PMPA price application the projections of the Department, which were more conservative than those of the company, indicated that without a further increase in motor premium rates an underwriting loss of over £10 million could be expected in 1981. The fact that a company is making profits at a particular point in time does not mean that no increase in prices is justified. It can very often mean quite the reverse, that unless a price increase is granted these profits will disappear.

An Ceann Comhairle: The Minister has three minutes left.

Mr. Meaney: I do not think any Deputy will disagree that it is necessary for all companies to make profits and it is even more necessary for insurance companies that their income from investments should offset their underwriting losses if the company is to continue to be able to meet the needs of the insurance market [1028] and to meet the statutory solvency margins which all insurers must comply with. As Deputies will be aware, PMPA is a wholly owned Irish enterprise.

Increases in motor premium rates is not something confined to Ireland. An article in the Financial Times of the 17 November 1980 complains that the majority of motorists who buy comprehensive cover in the UK are facing continued price increases and that most major insurers are back to two rate increases a year. The PMPA, it might be noted, who are the dominant motor insurer in this country, have received increases at intervals of a year and a quarter to a year and a half. The last increase for PMPA was the 1 September 1979. The article in the Financial Times goes on to mention a recent award of £340,000 to a motor accident victim, stating that this is reckoned to be the largest sum yet awarded for any individual motor injury in the English courts, but it is something that is not uncommon in Ireland.

Lest I run out of time, the Deputy raised some points to which I would like to reply. The NPC report for August and September will be published tomorrow. The October report has been signed out and is in print. It is from that report, which will generally deal with the present insurance case, that the Minister, before the report went to print — as is usual — informed the company making application for a price increase whether they were successful or otherwise. There was nothing unusual in what he did in this case. There was no undue delay in publication. The insurance matter will be discussed in the October report.

The Deputy also asked if the first £25 would be paid by insurance. The answer is yes. These excesses, as he called them, are not uncommon with other insurers, many of whom ask first for £50. I say this for the information of the Deputy and the House. Being a wholly owned Irish company I think the PMPA should not be pilloried in this House. Its accounts are examined by the Prices Commission as in the case of every other company. The fact that it has diversified into other [1029] trading activities and provided jobs for Irish people is something we should take into account. We should not try to wreck it or talk about it or try to wreck individuals as if this was for their own personal gain. Again, I support the Prices Commission [1030] in the work they have done and I think what I have said should satisfy the Deputy if he is in any way fair-minded.

The Dáil adjourned at 5.25 p.m. until 2.30 p.m. on Tuesday 25 November 1980.