Insurance industry - Harney puts premium on competition

FROM the home to the factory floor, the car, the school playground or the countryside, Irish insurance premiums remain unconscionably high and long-suffering consumers are paying through the nose for cover.

So there will be intense public interest in Tánaiste Mary Harney’s visit to London in the hope of luring cheaper insurance firms to Ireland.

If her bid to shake up this country’s insurance sector succeeds, it will be applauded by customers who for years have forked out for excessively high premiums.

Hopefully, Ms Harney’s visit will encourage British companies already considering locating here to compete for business against firms which have long dominated the market.

Ms Harney has spelled out the positive aspects of recent changes in the Irish market, including the establishment of the Personal Injuries Assessment Board (PIAB) and the impact of the penalty points system.

Moves to lower the cost of insurance will be warmly welcomed in a market so devoid of competition that it is tantamount to a cartel. If British firms can offer cheaper deals it would be a major breakthrough.

The cost of premiums soared when insurance companies jacked them up in the wake of the September 11 atrocity to recoup the losses caused by the subsequent stock market crash. Faced with a stark choice, people had no option but to pay up.

Today the industry rakes in vast profits, estimated by the Irish Insurance Federation at a whopping €747 million between 20 non-life companies in the Irish market in 2003.

Anecdotally, however, several small firms have been sent to the wall by exorbitant premiums. Others remain sceptical of brokers’ claims that reductions in the range of 20% to 25% have been made in the cost of employer’s liability insurance. Public liability premiums remain extremely high.

When Ms Harney unveiled the PIAB, she predicted consumers and business would benefit from significantly reduced premiums. As litigation invariably inflates the cost of personal injury claims by between 40% and 50%, Ms Harney hoped the board would make inroads in this figure by reducing the number of insurance cases that end up in court. Pricing and underwriting are the sole preserve of insurance companies and so governments are barred under EU law from intervening directly to influence premium levels.

Yet Ms Harney could underline the positive impact of government measures on operating costs of insurance providers in the Irish market as well as on premiums paid by policy holders across various types of insurance.

Thanks, for instance, to the penalty points system aimed at reducing carnage on the roads, car premiums fell by 14.5% between June 2003 and June 2004, according to the Central Statistics Office.

In the course of her London visit, Ms Harney briefed 100 managers from 33 companies in the British insurance industry about the level of progress in implementing the various ingredients of the Government’s reform of the Irish market. As she succinctly put it: “Attracting more players into the Irish market will benefit consumers.”

That enticing prospect is long overdue.