Seanad Éireann - Volume 131 - 18 March, 1992
Cost of Motor Insurance: Statements (Resumed).
Mrs. Honan Mrs. Honan
Mrs. Honan: I am due to speak next but I will give way to the Minister of State if she wishes to address the House.
Minister of State at the Department of Industry and Commerce (Mrs. O'Rourke) Minister of State at the Department of Industry and Commerce (Mrs. O'Rourke)
 Minister of State at the Department of Industry and Commerce (Mrs. O'Rourke): May I seek some information? When did these statements commence?
Acting Chairman (Mr. McDonald) Acting Chairman (Mr. McDonald)
Acting Chairman (Mr. McDonald): These statements commenced last Thursday. Each speaker has 20 minutes. A Minister has not made any contribution to date.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: I am, therefore, contributing to the debate, without any knowledge of what previous speakers said. I understand my colleague, Deputy Ahern, was present on that occasion. When I leave the House I will study the debate. I note the concern of Members of the Seanad and the other House in relation to the cost of motor insurance. It is unfortunately one of those issues which appear to be forever with us and for which there does not seem to be a ready answer. Great concern has been expressed about it.
The fundamental causes of high prices for motor insurance should by now be well known. Indeed, they were discussed as recently as 13 November and 20 November last in this House. During the course of those debates a comprehensive list of measures to improve the environment for all categories of motor insurance, identified by the inter-ministerial group on motor insurance, and subsequently endorsed by Government, was given. The measures announced by the various Ministers, including the introduction of necessary legislation by the Ministers for the Environment and Justice, are being given priority attention. Senators will appreciate that questions about road traffic legislation and legislation in relation to the courts are properly addressed to the Ministers for the Environment and Justice. However I will take note of whatever points are put to me by Senators. That would be the correct procedure.
The measures identified by the inter-ministerial group on motor insurance have the objective of improving the environment for insurance, particularly  motor insurance. The extent to which this objective is achieved will depend on the timing and the scope of their implementation and the impact which implemented measures will have on the frequency and cost of insurance claims.
The recent publication of the Coopers and Lybrand Review of Motor Insurance costs in Ireland and the United Kingdom confirms what the Minister for Industry and Commerce has been saying for the past number of years regarding the level of motor insurance costs here. In particular, I am glad to see the review reiterates the need to examine the level of awards for pain and suffering here and also the present mechanisms for resolvingn personal injury claims. It also draws attention to the level of professional, including legal, fees in Ireland and the late settlement of some claims.
The report concludes that personal injury claims costs in Ireland are over four times higher than in the United Kingdom — I accept that Senators spoke about this recently and it may sound as if I am lecturing them when they know all the facts but it is necessary that I read them into the record — and that the proportion of motor insurance claims which include personal injury compensation here, is five times higher than that in the neighbouring jurisdiction. Of course we have to ask the question: why is this so?
Are we more susceptible to injury in motor accidents and when injured do Irish people suffer more serious injuries than their counterparts in the neighbouring jurisdiction? Are our compensation levels too high and are our mechanisms for the resolution of personal injury claims too complex and too costly? We need as a society to seriously examine these fundamental questions. We cannot continue to claim more often for personal injury as a result of accidents, to accept compensation levels far higher than in other countries and at the same time hold a view that our motor insurance premiums should be on a par with those of other countries.
I should add that in the context of the inter-ministerial group on motor  insurance the Minister for Justice agreed that his Department would carry out a review of the levels of compensation awarded by the courts in the State in personal injury cases, and in particular the amounts awarded as general damages for pain and suffering and loss of amenities of life in the light of a 1991 survey by Davies Arnold Cooper which suggests that personal injury compensation levels in Ireland are much higher than in other EC member States and the report now published by Coopers and Lybrand.
There are 33 non-life insurance companies authorised to carry on motor insurance business here. It is not the function of the insurance supervisory authority to tell those insurers how to run their business or to interfere in their rights to accept or reject risks, or to dictate the terms applicable to any insurance policy, or to interfere in their rights to charge realistic premiums in the light of their underwriting experience.
Legislation is now being prepared to give effect to the EC Motor Insurance (Services) Directive, which is due to be implemented into law by the end of May 1992 and comes into force at the end of November. This directive will allow EC insurance companies to offer motor insurance cover, on a services basis without being established, in a uniform manner throughout the EC, subject to certain criteria, depending on the size of the risk undertaken. I attended a meeting in Brussels recently on the internal market at which insurance costs and the liberalisation of the market were discussed and agreement reached.
While the opening-up of the Community market may intensify competition on price, cover and quality of service, it should be noted that there is already a substantial foreign presence in the Irish insurance motor market. Over 70 per cent of non-life insurance undertakings operating in Ireland are foreign-owned. Increased competition may not necessarily lead to a reduction in costs here. Prudent insurers, indigenous, EC established or Community services must set their premium rates to match the compensation payout. The compensation  levels existing in each member state should determine the premium rates charged by both established and services insurers.
Unless and until the claims experience, including the claims frequency and levels of compensation, in Ireland matches that obtaining in other European countries there will be divergences between motor insurance premia in Ireland and those applying in other countries. While I may be repeating what has been said already — one might say ad nauseam — there is no getting away from what is stated in the last paragraph of the report. Until the claims experience, including the claims frequency and the levels of compensation, here matches the norm in other European countries, it follows that motor insurance premia in Ireland will be higher than those obtaining the other countries.
While we all await the end of 1992 and all the directives we sometimes speak of it as if it will be an El Dorado or a Valhalla towards which we will all travel with great expectations — it is often better to travel hopefully than to arrive, to quote the old Chinese proverb. The two factors I mentioned are those which cause the disproportionate level of premia in this country. The sooner we all grasp that fact, work on it and have an educative process, the better it will be for all concerned.
Mr. Cosgrave Mr. Cosgrave
Mr. Cosgrave: This is a most important debate. While I know it is one we have had before, until we get further action or a reduction in the cost of insurance particularly for our many young people, it is a debate we should continue to have monthly, if necessary, and certainly every couple of months.
We are all aware of the very high cost of insurance. The Minister outlined various aspects of it but the matter will not be resolved until the Minister can give a greater commitment than she has done in relation to certain action that she can take. I remember some years ago it was said in relation to the other half of the profession of which I am a member that  if you did away with or cut down on the number of barristers, all our problems would be solved. The “two senior barrister” rule has been done away with and often now just one barrister does most of the leg work. While there may be, at times, a smaller fee payable to a junior in drafting proceedings, by and large now only one barrister is involved, particularly in relation to the bulk of a fee in a case. Many of the cases are settled, but we have not seen a corresponding reduction in insurance. How much of the costs in recent years have been eaten up either excessive claims or processing claims? There has been an increase in the number of claims in relation to whiplash motor accident cases. Unfortunately, this is a growing industry.
We on this side of the House would support any action reducing the cost of motor insurance to the public and, in particular, to young people.
The Minister gave a brief résumé of the position and I am sure she could have said a lot more but although this is probably the responsibility of her colleague, the Minister for the Environment, I would have liked the Minister to address the whole question of uninsured driving. Various figures are bandied about, but the message from this House should be total condemnation of people who daily drive without insurance. I know it has been put forward that the high cost of insurance is a disincentive to be insured and I applaud some district justices who, in relation to second offences, make it their policy to jail offenders. I have had clients who will do anything to avoid appearing before certain district justices. These offenders who drive uninsured are akin to murderers. It is not acceptable for Senators to say that some drivers cannot afford insurance. Greater detection is necessary. The cars of uninsured drivers should be confiscated and sold and the money put into the Motor Insurance Bureau to help the many innocent people who insure their cars.
The whole question of the cost of motor insurance must be looked at. The Minister should have discussions with the  insurance industry into how they conduct their business. At times — I know this from dealing with it at first hand — some claims could be settled more quickly. There can be delays on both sides — the legal profession are not without sinners in this regard — but the question of some cases being processed more quickly should be discussed. I have dealt with cases which did not require a barrister. While some cases can be settled quickly, obviously cases involving serious injury must go to court because it would be imprudent and probably negligent to settle them quickly as the whole question of injuries and the prognosis for the future must be established. However, we have often heard about three or four people involved in a crash, thankful that they are not injured, but then stiffness, whiplash and other injuries set in a couple of months — or a couple of hours — later.
Mr. Hussey Mr. Hussey
Mr. Hussey: Compensation sets in.
Mr. Cosgrave Mr. Cosgrave
Mr. Cosgrave: Exactly. Years ago people were involved in crashes and would be thankful they were unhurt. People might slip on a floor in Bewley's, for instance, pick themselves up and go about their business, probably more embarrassed that they had been seen fall as it might be thought they were under the influence of alcohol. Nowadays the big thing is the “compo” mentality. Members of this and the other House must look at this aspect.
The issue with regard to the cost of repairs must also be examined. I am well aware of people going to garages not being asked about the damage to the car but whether it is an insurance claim or if the person is paying for it. I do not want to refer to quotations for repairs and car replacement. Recently I was speaking to someone involved in this business and he said the exorbitant costs they have to pay to insure their fleet makes people looking for a quotation for hiring a car think they are buying the car.
The Minister mentioned quite a good report by Coopers and Lybrand in relation to the difference between claims  and the higher frequency of claims here as distinct from the United Kingdom and how there have been significant underwriting losses in recent years. Expressed as a percentage of premia income, the Irish losses have been exceedingly greater in the years 1987-90. These are figures quoted in the March issue of Insurance Update, the most up-to-date source. The losses for that same period, 1987-90, in Ireland were 31.7 per cent compared to the United Kingdom losses of 19.2 per cent. There is no doubt the whole question here of accident claims, people claiming for next to nothing and looking for exhorbitant amounts must be looked at.
Will the whole question of the change in the jurisdiction make a difference because the bulk of claims were roughly, within, the old Circuit Court jurisdiction and in a region of £5,000 to £25,000? As regards the questions of whether there should be a review, obviously some judges are very realistic. I recently heard of a case where people said if things worked in their favour they could clear their mortgage, would have the money for their children's education and would probably be able to take a holiday.
More has to be done on this issue and I think the Minister is fully aware of this. He knows that many young people are finding it almost impossible to get insurance, that extremely heavy loadings are placed on young drivers and that the cost of hiring a car is very high. The people involved in the insurance industry need to take a hard look at exactly how they are doing their business. There also has to be greater monitoring of the insurance disc system. If the Garda or road traffic wardens did a tour of car parks I wonder what percentage of cars would be without an insurance disc. These discs are meant to help reduce the high cost of motor insurance. This question has not been satisfactorily dealt with. Some of these issues are probably the responsibility of the Minister's colleague, the Minister for the Environment and I am sure the Minister will consult with the relevant Departments because it  is not just a question of one Department being responsible.
As I said, there is a “compo” mentality in this country. We used to hear that American laywers were “ambulance chasers.” I think Irish lawyers are ahead of ambulances in terms of getting business. There has to be a rethink about the high cost of motor insurance, particularly for young people who are grossly discriminated against in this area. Consideration should be given to the introduction of a national policy or to increasing the price of petrol. This would sort out some of the cowboy operators. We should ensure that the full rigours of the law are brought to bear on these people. I am sure that like me, many people support justices who impose mandatory jail sentences on offenders, particularly second offenders. Consideration should also be given to the confiscation of cars.
I hope some of the points I have raised will be taken on board by the Minister. If they are not her responsibility, I ask her to refer them to the appropriate quarter. This is an on-going debate. Many Members of this House are concerned about the high cost of motor insurance, the high level of claims and the need to do something about this problem. Hopefully this debate, the ongoing measures which will be taken and the changes in our road traffic laws will lead to an improvement in this area.
Mrs. Honan Mrs. Honan
Mrs. Honan: First, I warmly welcome the Minister of State, Deputy O'Rourke, to the House. I wish her well in what is a very challenging Department.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: It is a very interesting Department.
Mrs. Honan Mrs. Honan
Mrs. Honan: I always said that if I was a Deputy I would like to be appointed to the Department of Defence, but now that I see Deputy O'Rourke in the Department of Industry and Commerce, I think I would like to be appointed to that Department. It would be lovely if I could appoint myself a Minister. That is one of  the privileges of being here, knowing you are going nowhere.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: The Senator is in a very important Chamber.
Mrs. Honan Mrs. Honan
Mrs. Honan: I repeat what the Minister said about the high cost of motor insurance. No matter how often we talk about this issue, people still seem to be confused and do not understand why there is such a big difference between the cost of car insurance in Ireland and in other EC member states. Even though we have to implement EC Regulations and Directives, almost every week which dictate what we have to do in certain areas, we do not seem to be able to put in place measures which will control the high cost of car insurance.
Looking at the issues which confront the insurance industry at present, the predominant issue is the high cost of car insurance. The insurance industry have received a lot of adverse publicity over the past year, particularly in relation to the cost of car insurance. Uninsured vehicles — my colleague, Senator Cosgrave, referred to this at length — account for approximately 8 per cent of total registered vehicles in Ireland while in other European countries they account for only 1 per cent of total registered vehicles, a difference of approximately 7 per cent.
Last year was particularly bad for the insurance industry. The deterioration in the underwriting results in the general insurance area was estimated to be £167 million. In 1990 motor insurance amounted to £137 million. That is a fairly high figure considering the number of motorists there are in Ireland. I question who is at fault here.
During the past decade the number of claims increased and the population has become very aware of the large amounts paid in compensation. We must ask if the courts are too generous and lenient in granting awards for damages. Some of my colleagues may not agree with me. The task of reforming the legal system and reducing the high cost of settling claims in Ireland is very difficult. I  remember a debate on the abolition of the jury system in such cases. I and a few others in the Fianna Fáil Parliamentary Party felt very strongly that the jury system should be left in place and time has proved that we should have been listened to. Perhaps this issue can be looked at again. As I said, we have to ask if judges are too lenient and awards too high. Awards here seem extraordingly high compared to those granted in other member states. I know it is dangerous to go down the road of commenting on judges at present but I am well known for making comments at awkward times. Extraordinary levels of compensation are paid for small injuries, including injuries over which I would go so far as to say there is a question mark. The Chairman should not be lifting his eyebrows.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: The Chair is meant to be non-partisan.
Mrs. Honan Mrs. Honan
Mrs. Honan: I must say that one complaint made against the insurance industry is that insurance costs in Ireland are much higher than those in other member states. Therefore we must ask whether Ireland has more accidents per head of population than other European countries. We pay substantially more in compensation to accident victims than do other countries. These amounts, of course, are determined by the courts and the standard are set by the courts. Ireland has the highest number of uninsured drivers in Europe. This whole area must be considered. I welcome the Minister's comments in this regard.
Aside from the increase in the number of claims, particularly fraudulent claims, the main reason insurance costs are so high is that the level of damages awarded to accident victims in Ireland is much higher than elsewhere. It is clear that policy holders are happy enough to see accident victims being paid large amounts, and I have no problem with that. I am not saying that someone who is entitled to compensation should not get it but I am focusing on the number of claims and the high compensation paid,  which results in higher insurance costs for everyone. This matter must be considered.
The predominant issue concerning the insurance industry in Ireland is the high cost of insurance. Insurance companies have received much adverse publicity over the past few years and, therefore, it is understandable that people are concerned about the high cost of insurance. The insurance industry shares this concern and would like to bring about a reduction that would benefit all of us.
In families where two or three members own cars insurance costs could amount to thousands of pounds. I understand the concern of the Minister and the Government, but this issue will have to be tackled. It would be naïve of us to think that foreign companies who come here would swallow up Irish insurance companies. In her speech the Minister stated that 75 per cent of such companies are already in the Irish market. What insurance company would want to insure people when they may have to pay extraordinary amounts in compensation?
I would like to conclude on a more optimistic note. There is deep concern in the insurance industry — I know the Government, the Taoiseach, Deputy Reynolds, and the Minister, Deputy O'Rourke, are also deeply concerned — at the extraordinary high insurance costs. This is a very complex matter but I know it will be tackled. It would be in the interests of insurance companies, policy holders and, indeed, the Government to take the necessary steps to reduce the cost of insurance. The insurance industry should be able to provide insurance for all its clients at a rate in line with that in the rest of Europe. We hear much about European rules in 1992, 1993 and 1994. This is a complex issue and insurance companies, the Government and the legislators should, in the future, provide for reduced insurance costs, safe driving and reasonable compensation. As Senator Cosgrave said, there is an extraordinary consciousness among Irish people with regard to compensation claims.
I hope I did not come down too hard  on one side or the other this evening. This matter has been discussed over and over again and much can be said about it. In her speech the Minister referred to knowledge and so on, but people are still confused as to why we, as legislators, do nothing to reduce the cost of car insurance. It is unacceptable that three or four people in one family should have to pay nearly £2,500 a year in insurance costs.
Mr. Harte Mr. Harte
Mr. Harte: I agree with Senator Honan with regard to claims against insurance companies. Awards may be exorbitant but there is much more to the story. It is sad that a great number of young people drive without insurance cover, not because they want to but because they cannot afford it. One could say that the cost of insurance is beyond the reach of young people on an average wage. It is almost impossible for these people to get insurance cover. It is sad that, because of financial constraints, people cannot do the lawful thing. Most of these people would prefer to operate within the law but cannot afford to pay £15 or £16 a week out of a modest income for insurance. We cannot say that the high cost of insurance results from huge awards against insurance companies. Insurance companies are usually involved in other business and make very substantial profits. In my view they are not open and above board in this regard. For example, in the UK and other EC countries young people can get insurance for about £150 to £200 per annum. It is extraordinary that it is almost impossible for our young people to get insurance. It is a different matter if older people earning a decent wage break the law regarding insurance cover. It is wrong for anybody to break the law, but there must be some understanding with regard to young people.
We all remember Deputy Brennan, as Minister, introducing a Bill to this House which was discussed at length. The Minister went out of his way to facilitate the insurance companies and we were all very impressed with the way he handled the  matter. He outlined assurances, which he believed to be genuine, the insurance companies had given him. At the time an insurance lobby, one of the most powerful in the country, persuaded the Government of the day that high insurance costs resulted from high compensation awards. They tried to blame everyone except the insurance industry. One of the best examples of that occurred during the discussions about the proposal to abolish juries in personal accident claims. It seems that the industry had the mistaken belief that the end result would be a lowering of awards. As we know, the abolition of juries has not reduced the size of awards and insurance premiums have continued to increase. The industry previously said that if certain things were done everything would work out well for them but, in fact, that has not been the case.
Down through the years we have heard insurance companies complain about making losses on motor insurance. However, we have not heard much about the companies' overall profitability. Insurance companies are probably the only businesses in which profit and loss are measured together on a by-product basis. I am not aware of any other industry in which that system operates. Supermarkets and ther big companies such as Guinness do not operate that system; if there is a loss in some aspect of their business they do not take that out on the public and say they will not provide a product because they are making a loss. Insurance companies make substantial profits but they break down their business on a product by product basis. They then argue that motor insurance operates at a loss; totally ignoring the high profit margins enjoyed on their overall activities.
To me, the proposal to abolish juries in personal accident claims was an example of the way the industry can gain a lot of sympathy by heavy lobbying. The Government and the Minister, Deputy Brennan, not only tried to facilitate the industry but he tried to bring about a decent insurance system that could be  respected. The Government really believed the industry's plea to abolish juries in the case of personal accident claims. I know I fell for that argument hook, line and sinker. However, the end result was not that predicted by the insurance industry.
I do not wish to delay the House as there are probably other Senators who would like to contribute to the debate. However, I do not consider that the problems with insurance companies can be put down to the high amounts of damages awarded by courts. There is something amiss when a young person in the United Kingdom or other EC country can obtain insurance for £150 to £200 per annum while the cost is much higher here.
Mr. Hussey Mr. Hussey
Mr. Hussey: I welcome the Minister, Deputy O'Rourke, to the Chamber. I congratulate her on her appointment and wish her every success in the Department of Industry and Commerce.
Today's debate is very important from many points of view but particularly for the motoring public. In recent years the cost of motor insurance has been a subject of debate in both Houses of the Oireachtas. Many reasons have been put forward to explain the huge increases in premiums. New legislation was enacted in the hope that changes made to our law would succeed in keeping down insurance costs. However, as we all know, that has not happened. The situation has now deteriorated to such an extent that insurance is out of the reach of many people, and particularly young people. Since many young people cannot afford to pay the premiums quoted, unfortunately, they drive without insurance. In doing so they are, of course, breaking the law and are a risk to other road users.
The recent report by Coopers and Lybrand on the comparative costs of private motor insurance in the Republic of Ireland and the United Kingdom sets out some of the contributing factors of the comparatively high cost of motor insurance in Ireland. One key factor they point to is that Irish claims costs are significantly higher than those in the United  Kingdom. It is noted that personal injury claims are 2.5 times more likely to arise in the Republic of Ireland than in the United Kingdom; non-comprehensive claims are five times more expensive and comprehensive claims are three times more expensive here than they are in the United Kingdom; personal injury claims are four times more expensive and damage claims are twice as expensive in Ireland; the fatal accident claim rate in Ireland is 2.5 times the rate in the United Kingdom; the serious injuries claim rate is 1.25 times higher in Ireland.
Another contributing factor was the cost of spare parts. Spare parts cost as much as 33 per cent more in the Republic of Ireland than in the United Kingdom. Car repair times are longer in Ireland also. The authors of the report conclude that if the differential on motor insurance rates between the Republic of Ireland and the United Kingdom is to be reduced, any action plan must address the main factors leading to the huge difference in claims costs, that is, the value and frequency of personal injury claims.
The authors of the report highlighted the following issues they felt should be given priority attention: the number of claims, high accident frequency, standard of road system and maintenance of roads, standard of road traffic law enforcement, value of claims, level of awards for pain and suffering, an issue referred to by many speakers in the debate this afternoon, the level of professional fees and the late settlement of some claims.
All those issues are within our competence and could be put right if we had the will to tackle them. We certainly have the competence to tackle the issue of roads. I am sure the state of the roads contributes to the number of accidents. The standard of road traffic law enforcement is something else that we can do something about. The level of awards for pain and suffering seems to be enormously high here in comparison to the level of awards in other countries. I hope something will be done about that because the level of payment seems to be out of proportion. The level of awards paid in any other country is not as high  as that paid here. In that regard, I do not know whether the fault lies with the courts, whether the insurance companies are too lenient or if there is some other reason. The size of an award here is well beyond what could be paid after a similar accident in any other European country.
I am very pleased to note that a Cabinet sub-committee are now examining this serious problem and I hope action will be taken before too long. It is time to tackle the fundamental issues highlighted in the report of Coopers and Lybrand.
There is no way Irish motorists can continue to pay premiums for comprehensive cover that are on average 48 per cent higher in Ireland than in the United Kingdom and 133 per cent higher for non-comprehensive cover. The position is even worse for young drivers in that the majority of insurance companies will not even give young drivers a quotation; and companies which do quote for young drivers make their prices prohibitive. I have personal experience of that. I run a small insurance business and every week young people try desperately to get car insurance. Some of those people would be working in Galway, some 35 or 40 miles away. They are trying to drive in and out of Galway. But in many cases they cannot because none of the insurance companies with which I do business would even give quotations for drivers under 25 years of age. Therefore they are left with a choice between the PMPA and the Guardian Royal Exchange, the only two companies that will give them a quotation. Indeed I have seen some such young people being offered insurance at a premium of £1,500, £1,200, even £1,700 while, in most cases, the car they seek to insure is worth only about £1,000. They will probably have bought the car for that amount but it may be worth even less. Therefore, such insurance premiums are totally unreasonable.
I have suggested that all insurance companies should be compelled to insure a certain percentage of young drivers. If such share-out were possible it would  open up the market to young drivers, enabling them to be insured at a competitive rate rather than be confined to two insurance companies only as is the case at present.
I believe one company engages in 95 per cent of the business in regard to motorcycle insurance, thus young people have no chance of obtaining cheap premiums. Indeed in recent times such premiums have been increased. Young people starting off in life, trying to get established in employment — and it is hard enough to obtain employment in these times — are being discriminated against in every sense, whether seeking insurance cover on a motorcycle, car or whatever and cannot obtain such cover at a competitive rate.
Recently the Oireachtas Joint Committee on Secondary Legislation of the European Communities discussed a proposal for a third Directive on non-life insurance, which proposal will complete the internal market in the non-life insurance sector. This means that an insurance company, with a head office licensed in any member state, will be able to operate throughout the Community on the basis of branch establishment or cross-Border provision of services. Under present Community legislation supervisory control is exercised by member states where branches are established or where insurance services are sold. Under the present proposal supervisory control will be exercised by the State in which the head office of the insurance company is located, that is the home country. The present proposal will supplant the second non-life insurance Directive — which was reported on by the same Joint Committee and implemented by the EC Non-Life Insurance Regulations, 1991, Statutory Instrument No. 142 of 1991 — which represents partial implementation of the single licence concept. It is intended to complete the process to provide for single licence home country control and harmonisation of measures to safeguard consumers. If that third Directive is adopted it will provide a single market in insurance, enabling all European citizens  to shop around for the kind of non-life insurance, including health, whereas the second Directive allowed only the choice of law in respect of certain large risks. It is now proposed to extend this facility to all insurance contracts.
In that regard the Department of Industry and Commerce generally welcome the concept of single licensing. However, as over 80 per cent of the non-life insurance sector is foreign-owned — of which 60 per cent is on a branch basis — the new proposal would entail a change of administrative control over a substantial segment of the market. Freedom of capital movements within the Community will mean insurance companies will have greater freedom to invest their assets to best advantage within the Community.
Therefore we can look forward at the end of 1992 to considerable changes in the insurance business, to which the Minister referred earlier this afternoon. However, I remain uncertain that that will mean cheaper insurance for Irish motorists. We all know that premium rates will be dictated by the amount of claims. Unless something is done about such claims, we cannot expect to see cheaper insurance for quite some time to come.
For insurance purposes our small country is divided into different areas. For example, the rates obtaining in Dublin are much higher than those in the remainder of the country. Indeed there are certain areas in Dublin where companies will not provide insurance cover at all which is terrible. Cover in Galway is cheaper, and cheaper again in the southern part of the country. It is unfortunate that people are faced with this ever-increasing burden of insurance, whether it be house insurance, car insurance or public liability insurance. It is all occasioned by the huge increases in claims in recent years, many of the reasons for which have been spelled out by the Minister and by other Senators today. For all our sakes I do hope something positive will be done about this in the very near future. We are fast reaching the stage at which people will be unable to insure  their property or cars because of the high premiums, which would be disastrous for everybody.
The Garda did an excellent job in their blitz on drunken driving over the Christmas period. Some such exercise will have to be engaged in as regards uninsured motorists. We have been told here this afternoon that 7 or 8 per cent of our motorists drive without insurance cover, leading to an ever-increasing burden on those prepared to pay for insurance cover. I hope something positive will be done about that. It places the community at large at terrible risk if somebody involved in an accident with such an uninsured driver is injured. I hope that in the very near future something positive will be done to address the huge costs of insurance cover here, about which there has been much discussion. It is now time for action.
Mr. O'Reilly Mr. O'Reilly
Mr. O'Reilly: I wish the Minister good luck in her new Department. I met her on a number of occasions when she was Minister for Education because of my involvement in that sector.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: I thank the Senator.
Mr. O'Reilly Mr. O'Reilly
Mr. O'Reilly: Obviously the critical aspect we must examine is the shocking position obtaining in relation to our young people seeking car insurance cover. We cannot overstate or sufficiently emphasise how bad that position is. In fact I would see the cost of car insurance for many young people as being a tax on work, in that a car is essential for that purpose, particularly in areas where there is no DART, rail network or immediate bus service. Effectively then car insurance premiums are a tax on work and must be a disincentive to young people in the lower income categories to engage in work at all, bearing in mind the amount they receive in social welfare, and as against their wages in a low-paid job.
I must confess to being somewhat more cynical about insurance companies than some of my colleagues. I would appeal to the Minister to carry out a root and  branch examination of insurance companies, how they function and the bases of their claims. When I consider the number of insured drivers who pay the high premiums and do not have accidents I am not convinced that all the crying and whinging of the insurance companies is justified. That is worthy of a second look. I would certainly need to have the facts established very clearly.
I am not inclined to believe the public relations blurb from the insurance companies. It is worth examining whether the companies are in the difficult position they purport to be in. Controls need to be introduced so that they could not decide willy nilly to insure one sector and not another sector of the population or engage in any arbitrary practices.
I do not know whether it is going too far to suggest that the subcommittee of the Cabinet should examine the issue of providing a State insurance system as an alternative to private insurance. The proposal is worthy of consideration. My point is that the existing level of insurance premiums cannot be allowed to continue. Options worth considering are a State insurance system or, perhaps a levy on petrol, but they would need to be examined by a committee dealing with this question.
We can do a number of things in addition to asking the insurance companies to reconsider their positions. Speed is a contributory factor to accidents and this has to be given more consideration than has been the case to date. It is correct and proper that the blood alcohol level has been dealt with. We need to focus on speed as a contributory factor to accidents. Politicians at all levels say that our road network is not suitable for the speeds at which vehicles now travel. More speed checks are needed if we are to reduce accidents. I suggest that a national system of speed checks be put in place as a priority. Reducing speed on our roads will be a major contributory factor in reducing the number of accidents. I was very impressed by the recent radio advertisement. There is a very effective advertisement on radio at  present on speed causing deaths. The issue should be dealt with immediately.
Obviously the campaign on alcohol should continue and the breathalyser campaign must remain a priority. That campaign is in place and not much more can be done about it. I should like to raise a point which is not necessarily relevant to this debate — I know it has been mentioned by one backbencher TD of the Government Parties — and it is a difficulty of which Senator O'Brien and the Cathaoirleach would be acutely aware. There are difficulties in isolated areas where people, particularly those living alone, have no social outlet other than their local bar or lounge. In fact that is their only human contact. It is not ideal but that is the reality. There is the added difficulty that they do not have a rail or taxi service. It is very difficult to know how to get around that problem but certainly they cannot be allowed to drink excessively and then drive. Discretion will need to be used in instances like that. The point is that the campaigns on speed and alcohol must continue to keep down accident levels.
My colleague Senator Cosgrave addressed the question of the role of the legal profession. That was helpful because of his first hand experience. I would be cynical of insurance companies and their pleading that all is right in their houses and they need to charge high premiums. We must bear in mind the point made by Senator Harte that their other operations are particularly profitable.
However, I question also the role of the legal profession in this. It needs to be examined. Just as we have to have a preventative system for accidents, and keep the hands on the insurance companies, equally, the legal profession cannot be allowed to continue, as in some cases they do, to charge very high fees, for protracted cases which cost a fortune.
Obviously the number of claims is very high. There is some validity in the point that people suffer from delayed whiplash or all sorts of delayed syndromes. The compensation mentality may set in. That is unfortunate. The way to deal with that is through an education programme, on  the values to be instilled in our young people. In our primary schools, we will have to instil a value system in our young people and highlight how wrong are unjustifiable claims. I know it is not particularly germane to this debate but I am convinced that it is not lucky in the long run to make a fraudulent claim. I hold the old-fashioned view that this cannot bring great fortune to the claimants. The logic of that can hardly be got across to them. The number of claims is certainly a problem. The only answer to this is an education programme; and that idea may have potential. The level of awards is obviously too high in a number of cases and that needs to be tackled.
It would be churlish not to welcome the fact that a Cabinet subcommittee are working on this problem. The solution will have to be radical. It is among the most urgent matters facing the country at present in that it affects the cost of young people's car insurance. It is a tax on their work, as well as on their way of life.
Radical solutions are needed. We will have to reduce accidents by curbing speed and continuing with the breathalyser campaign. We must look at the role of the legal profession and their charges; the way claims are processed; the number of lawyers involved, and the arbitration system. The amount of awards will have to be examined again and, I suggest, the insurance companies should be examined. They should not be allowed continue with arbitrary practices such as deciding to insure one sector and not another.
Finally, if it is not too fanciful — I am not in a position to go through the figures — we should look at the suggestion of establishing a State insurance system as an alternative to private insurance systems. This matter deserves a worthwhile debate. It is my view, and the view of a number of Members, particularly new Members, that we need to hold debates that are relevant to people. It will make this House more meaningful to all if we have more of this type of debate. This is an urgent problem and I hope solutions will be found quickly.
Éamon Ó Cuív Éamon Ó Cuív
 Éamon Ó Cuív: Fáiltím roimh an díospóireacht seo. I welcome this debate. I remember when canvassing, particularly young people, in 1987 one of the questions I was asked was what in my view could a politician achieve. One of the things that was on the top of my agenda at that time was that something should be done about the cost of car insurance here. When they asked me whether I thought it was possible, I said it was but that for every decrease in price there would have to be a corresponding cost in dealing with some of the abuses of the insurance system as we know it.
The booklet, a copy of which most of us received recently, dealt with insurance particularly from the point of view of the frequency of claims, etc. We have to recognise a few facts: first, we have a very high level of claims in this country; second, awards are astronomically high; third, we have very high car costs and car repair costs which are exacerbating the problem; and finally, legal fees, delays and days in court add tremendously to the cost of insurance.
I would like to address myself to the insurance companies. We were told that the problem was with the juries and that if we abolished the jury system premia would be reached. The juries are gone but the premia have increased. Later still we were told if we could reduce the number of barristers from three to two that would do the trick. I understand that was implemented but we are still at square one — in fact, we are going backwards. The next time there is a reform of the system insurance companies should be forced to give a firm undertaking of a percentage decrease in return for changes in the system. If we do not achieve that, the public will be cynical about any tightening up the law or any reduction in the pay out in claims. This is one of the most urgent problems, particularly in rural Ireland where we do not have anything approaching a public transport system. Cars are a necessary method of transport for young and old alike. Many young people need cars to get to work and the average insurance cost is in excess of £1,500 a year — and  it can be as high as £2,000. I have a constituent, a young man of 28 years of age, who is sensible, no claims have been recorded against him and yet he was asked for a premium of £1,500. He works as a forestry harvester and needs a car to get to work. It is not reasonable to expect somebody who has paid his tax to pay that type of insurance premium. It is also not reasonable to penalise somebody who has never had an accident.
I wish to address the question of loading. Certain people — actors, entertainers, etc. — are often loaded because of their profession. Unless it can be proved that theirs is a high risk profession, that type of loading should be banned.
As regards loadings on young people, I would like to say a word in defence of women. There is a good case to be made — and statistics will probably prove it — that the rate of accidents, particularly among young women, is no higher than among the older population. I would be the first to admit that there is probably statistical evidence to show that young people in general and particularly young men have a higher rate of accidents. It is a well documented fact that women drivers are considered low risk.
Let us address ourselves realistically to the risk factor involved with young men. Where young people have been involved in prosecutions for reckless driving, dangerous driving, speeding, drunken driving, etc., I have no objection to loading. However, it is unfair to put severe loading on young people who never had an accident simply because a general statistic shows that, on average they have more accidents than older people. If they are considered to be a high risk group, an analysis should be made of the time of day and the circumstances in which they are a high risk. I believe young people normally are a very high risk at night time. If we were to examine their driving to and from work during the day I am sure it would be proved that they are no more a high risk group than older people. Therefore, a case could be made to insure young people, particularly those  who need cars to get to and from work and whose livelihood depends on a car, between certain hours. For example the insurance would not be valid between midnight and 6 a.m. which is, I understand, the high risk time for people in that age group. In that way young people would not be penalised and out of jobs because they could not afford the insurance premium which is loaded to cover the more reckless young drivers.
As regards the legal profession, the court and the cost of insurance, I have known cases where, even in minor accidents, there have been wrangles month after month as to who was responsible in the typical 50/50 accident which occurs all too frequently, where there has been no Garda involvement, no prosecution, and the damage was limited to vehicle damage only. To me, this is to engage in semantics. When you go on the road you are like a footballer going out on a football pitch risking injury in an accident. The question of liability should not arise. In other words, I am arguing in favour of a no fault system, except in the case of a prosecution being taken against one of the drivers. In that case — and that would be only in the most very serious accidents — I see good reason to ascertain who was the responsible party and the question of liability should be ascertained. The cost of legal fees in all the other cases does not justify the cost involved and a uniform saving to all insurance holders would result if, in ordinary small car accident cases nobody tried to establish liability. This would be a big advantage. Furthermore, if we continue with the court system to sort out disputes — and there is a good argument for not doing so — I argue that the lower courts should be empowered to grant high sums of money in line with money values of today.
Damage, particularly for pain and suffering, should be assessed on a professional basis. The idea of a court deciding not only where responsibility lies but on the amount of damages leads to the type of lottery with which we are all too familiar. This area should be looked at and action taken. There is no way money can compensate for pain and  suffering and to try to do so is futile. Payment for pain and suffering should be kept to a reasonable level. Insurance claims and insurance awards have become a form of lottery, even bigger than the national lottery.
In relation to enforcement of the rules of the road, I hold fairly strong views. We should be honest and admit that we are not strict enough when it comes to applying the rules of the road. It would be fair to say that we have enough rules. If these were applied, we would bring the whole country to a halt. We have reached the ridiculous situation where even though everyone knows that the national speed limit is 55 miles per hour — I understand it is to be increased to 62.5 miles per hour — nobody keeps to it. It must be a national joke. We should have laws that are capable of being applied. We should have speed limits on our roads that people feel are reasonable and the ordinary citizen, in his own careful way, would adhere to. Those rules should then be applied.
In relation to transgressions such as speeding, we should introduce a system of on-the-spot fines. If those fines were reasonable, it would be much easier to apply them and operate them as a deterrent. It is my experience that if penalties are too draconian there is a temptation not to apply them to the letter of the law because the penalty at times seems to be too great. Therefore I would like to see laws that are slightly more liberal, penalties which are capable of being applied, where possible on-the-spot, and applied rigidly. Resources should be made available to ensure that the rules of the road are applied rigidly and to ensure compliance, with particular reference to speeding, drunken driving, cars in poor mechanical shape etc. — the danger areas.
An analysis should be carried out to determine the high risk periods of the day. Many accidents appear to happen between 12 midnight and 6 a.m. when people are returning from discos and dances etc. We have to be realistic about this. It is my understanding that the chances of speed limits being enforced or  someone being breathalysed at 3 a.m. are relatively small. That matter is a source of concern for me. Not only has this led to the position being exacerbated in relation to insurance costs but we must be honest and say that it is also costing lives. Nobody wants to see the carnage continue every weekend, particularly when young people's lives are at risk. While I would like to see this problem tackled, it has to be tackled in a tough way because there are no easy answers. If we want to reduce the cost of premia, we will have to reduce the size of awards and bring about a reduction in the number of accidents. I hope that by having this debate we will encourage every party involved to take firm steps to address this problem.
In the context of the free market come 1993, given our insurance costs, the cost of vehicles here, our peripherality and our dependence on the motor car, I shudder to think of how we are going to compete with our more cost competitive neighbours. I hope therefore that after this debate we will see radical action being taken and hard decisions being made on all sides. I hope also that the vested interests — there are vested interests who are making money under the present system — will be met head-on and challenged and that, where necessary, steps will be taken to ensure that the cost of allied services is reduced. To return to a subject I mentioned at the outset, we are all aware of the cost of court cases. Barristers — we now know how much they can cost — engineers, witnesses, medical experts etc. can wait for days on end before court cases are heard which are then settled out of court. Everybody knows this happens but to date it is a scandal that has not been met head-on. Unfortunately, the people have been made to pay the price. There has been a lack of uniformity in relation to awards and this has also led to the position being exacerbated. Many people feel it is worth their while taking cases to court because the awards are greater than if they setle out of court.
All these matters will have to be addressed, and I am sure that the Minister  of State in her new portfolio will do so. I know she is aware of the problems, particularly those facing young people, in this sphere. I wish her well in tackling ths area. I should say to her that the person who cracks this particular chestnut will certainly earn the gratitude of the Irish people, in particular our young people. I have no doubt that they would pay the price, in terms of restrictions, enforcement of the rules of the road and lower awards, in return for a reasonable, modest insurance premium that they could afford.
Mr. Neville Mr. Neville
Mr. Neville: I, too, would like to welcome the Minister of State to the House and to wish her well in her new and important job. I know she will do as well in this Department as she did in the Department of Education and as she was shaping up to do in the Department of Health. The members of the Western Health Board were looking forward to her visit before she changed portfolios——
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: I was looking forward to it myself, Senator. I did not change my portfolio at all.
Mr. Neville Mr. Neville
Mr. Neville: ——or before she had her portfolio changed for her.
Mrs. O'Rourke Mrs. O'Rourke
Mrs. O'Rourke: That is better.
Mr. Neville Mr. Neville
Mr. Neville: Like other speakers, I welcome the opportunity to contribute to this debate, which is both timely and important. It is important that, as a nation, we are able to compete in Europe. We must realise that anything that increases our insurance costs also places high cost on industry and on services which are in competition with our friends in Europe.
The Coopers and Lybrand report is enlightening. Figures now available show that the cost of comprehensive insurance is 59 per cent higher here than in the United Kingdom while the cost of non-comprehensive insurance is 151 per cent higher. This indicates the damage which has been done in relation to our competitiveness  and the cost to industry in that area.
In relation to claims frequency the rate is lower here than in the United Kingdom. The level of claims in respect of accidents, especially where injuries are minor, and in respect of thefts in the United Kingdom are higher than is the case here. Indeed it is interesting that in general people in Ireland do not make claims in respect of minor damages whereas in the United Kingdom claims are made in respect of all damages. Despite this there is greater consciousness of litigation in society. The percentage of claims awarded here in respect of personal injuries is approximately five times higher than in the United Kingdom. It is interesting also that notified claims in respect of personal injuries make up 20 per cent of all claims here whereas in the United Kingdom they make up just 4 per cent of all claims. The cost of awards for damages in respect of comprehensive cover is three times higher here than in the United Kingdom and five times higher in respect of non-comprehensive cover. It is also of concern to learn that we have two and a half times the number of road fatalities relative to the United Kingdom and 1.25 times the number of serious injuries.
The need to look at our road system and to improve it has been debated at length but it bears repeating. We also need to improve our county road system, we are carrying out improvements with EC funding to our primary road system in some areas, That should be stepped up and I hope that under the new Structural and Cohesion Funds the improvement to the primary road system can be increased.
It is also interesting to note that the number of Irish people who ensure that their vehicles are mechanically in order is much lower than that of the UK, it is interesting to learn that one in 12 accidents is due to defects in vehicles, this should be highlighted. The cost of spare parts in Ireland is between 8 per cent and 33 per cent higher than in the UK and I do not understand why that should be the case. Most of the parts are imported from  outside both islands, therefore, I do not understand why they should be dearer here which, obviously, makes it more expensive to repair cars. We should look at the level of awards for pain and suffering which is far in excess of other countries I will draw attention to that later on.
Our professional fees are 20 per cent of the cost of the total payments, that sounds very high. It has been mentioned in the debate already. Obviously there is a good industry around all this where legal people and other professions are obviously making a very good living out of motor accident and injury litigation. I do not understand why it should sometimes take up to four years to settle claims. I have discussed this with barristers who say that if there was a will to improve the system it could be done in a much shorter time with less cost involved.
The difficulties with the high loading on young drivers have been highlighted, too many young drivers are forced to drive without insurance. It should not be tolerated, but the premiums are prohibitive, £1,000 to £2,000 are the usual quotations for young drivers. As Senator Ó Cuív said at the last council election it was one of the issues mentioned at the doors on quite a few occasions during canvassing. There should be a system of incentives to reduce the level of accidents involving young people. There should be a system of licensing for driving schools and we should introduce a specific driving tuition scheme targeted at new, inexperienced young drivers, the insurance company should introduce substantial discounts to young drivers who take such a course and who have completed a test of competency in the rules of the road and in driving itself.
The Motor Insurance Bureau of Ireland paid out £18 million in 1990 in personal injuries claims to victims of uninsured drivers, about £20 per insured driver. The cost of damages to property is not included and in too many accidents innocent victims suffer loss with no compensation because the drivers are not insured. It is necessary to clamp down on the whole area of uninsured drivers. We  welcome the European Court ruling that Ireland was acting illegally in keeping out competition, competition from overseas is welcome but again the insurance company will say that because of the level of claims and compensation we are not attractive to outside competitors in the insurance industry. I hope time will prove them wrong in this regard.
Insurance companies should also look at the efficiency of their own systems. The growth and management expenses for insurance companies over the past number of years has been 20 per cent per annum, which, on average is 1.75 per cent the rate of inflation over the same period of time. We welcome the report by Coopers and Lybrand but it did not refer to certain costs, in fact the management expenses of the UK companies are less than two thirds of those of the Irish companies. What can we do about it? As well as improved efficiency in the insurance companies there is also a need for better services to the customer. There should be more access for the customer to information about the terms of his policy, the structure of premiums and the level of commission and services charged so that the consumer can shop around freely with full knowledge. There should be a code of practice for brokers and agents to protect customers from unfair selling practices. The insurance industry should establish an insurance Ombudsman to provide a simple mechanism for settling complaints by clients about the treatment by insurers, a scheme that is run cheaply and effectively in Britain. We should remove the practice that unfairly victimises particular groups. Insurance companies have different groups of people whom, for various reasons, they load, for example, disabled drivers still face a 10 per cent loading where there is no actuarial foundation for doing this. Even more unjust is the fact that victims of untraced drivers receive much lower compensation than the compensation paid to victims of drivers of uninsured vehicles.
Premium structures should be tailored to give bonuses to those who are willing to improve their safety standards on the  road. The abolition of juries did not reduce the level of settlements, which was very disappointing. Fine Gael have proposed that there should be a book of quantum damages to guide judges in making awards and to standardise, as far as possible, the levels of such awards. This would tend to reduce the recourse to court hearings as the level of damages in a particular case could be predicted in advance. One must recognise that damages will vary in particular cases. The loss of a limb or a faculty would have different effects on different persons depending on their occupation; there should be regular conferences of judges themselves.
Mr. Fitzgerald Mr. Fitzgerald
Mr. Fitzgerald: We will take a statement on Tuesday and Wednesday of next week with the agreement of the Whips. I thank the Minister for being in the House all day.
Sitting suspended at 6 p.m. and resumed at 6.30 p.m.
Seanad Éireann 131 Cost of Motor Insurance: Statements (Resumed).