Dáil Éireann - Volume 487 - 18 February, 1998
Written Answers. - Motor Insurance.
Mr. C. Lenihan Mr. C. Lenihan
28. Mr. C. Lenihan asked the Tánaiste and Minister for Enterprise, Trade and Employment the plans, if any, she has to reduce the inordinate cost of insurance for young drivers; and if she will make a statement on the matter. [4178/98]
Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy) Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy)
Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy): As the House has been informed in response to previous similar questions, following the publication of the Deloitte and Touche report on Insurance Costs in 1996, the issue of the high cost of motor insurance for young drivers has been receiving continuing close attention from my Department, in consultation with the insurance industry and other Departments and agencies.
 The consultant's report found that premium rates in EU countries are high for all young drivers relative to rates charged to more mature motorists. This reflects the significantly higher insurance risk represented by young drivers as a category based on their claims experience. It follows simply and logically from that fact that the key to reducing insurance premiums for young drivers is to raise their standards of safe driving. This is not only in their own interest, but in the wider interests of the community at large who suffer the consequences of unsafe driving by young motorists.
A number of initiatives have been taken to improve driving standards and safety awareness among young drivers. These include the introduction of a scheme of insurance premium discounts by the insurance industry in conjunction with the driving instructors register on completion of a required number of driving lessons; the introduction of road safety educational programmes for students and advertising campaigns to discourage speeding by the National Road Safety Authority; and the on-going examination by the Department of the Environment and Local Government of a graduated licensing system for learner drivers.
As a result of a series of meetings which I have had with the industry, Guardian PMPA, the leading motor insurer, recently announced the introduction of a special 6 per cent introductory discount for young male drivers aged 17 to 24 years who currently receive a nil no claim discount, with reductions also being given to young female drivers. The Hibernian Insurance Company is also operating a smiliar scheme.
It is relevant to point out that these concessions to young drivers have been introduced against the background of increasing underwriting losses in motor insurance. The 1996 annual insurance report prepared by our Department, showed that motor insurance underwriting losses increased from £41 million in 1995 to £90 million in 1996. The deteriorating underwriting situation has led some insurers to announce increases in certain insurance categories in 1998.
In those circumstances, any reductions or discounts offered to the young drivers must effectively be subsidised by increased premia paid by lower risk categories of motorist. It does not make good commercial sense, nor is it equitable, that safer drivers should subsidise less responsible drivers. That simply reduces the incentive for safe driving among all classes of motorists leading to increased claims costs and a progressive deterioration in insurers' underwriting accounts. The end result is that average motor insurance premia in the economy will operate at a higher level than would otherwise obtain if the principle of riskbased premium setting is strictly applied to all motor insurance categories.
As I said at the outset, the only realistic solution to the problem of high premia for young motorists is to effect a sustained quantum  improvement in their overall safety performance on the road.
Dáil Éireann 487 Written Answers. Motor Insurance.