The Insurance Compensation Fund (ICF) was set up to protect policyholders whose claims couldn’t be met by their insurers in cases where the companies had become insolvent.
While insurers support the fund through payments determined by the Central Bank, in reality policyholders pick up the tab as companies tend to pass the charges onto customers.
This has been especially true since November 2011 when a 2% levy was added to all non-life insurance policies in the wake of the collapse of Quinn Insurance.
New figures released by Finance Minister Michael Noonan reveal the breakdown of payments from the fund each year between 2011 and 2015.
Payments made in 2012 were the largest during the five-year period, when ICF paid out €499.17m as a result of firms that had been placed in administration.
In comparison, €350m was paid out in 2013 and €331.17m in 2011.
Last year, the fund made payments totalling €275m.
These payments went to covering the cost of policyholders’ claims that their insurers couldn’t meet.
The level of payments from the fund over the last five years, which were released to Sinn Féin finance spokesman Pearse Doherty, shows the scale of dysfunction in the insurance market, which has also seen premiums spiral significantly higher in the past 12 months.
The cost of motor insurance, for instance, has increased by 33% in the last year alone.
“Over the last 12 months consumers have seen premiums increase substantially and when you look at this €1.4bn being paid to failed insurance companies it angers people,” said Mr Doherty.
The insurance sector argues an increased number of claims, growth in the number of people going to court to seek compensation, and low levels of reserves in the industry are to blame for the hike in premiums.
The insurance levy, introduced after Quinn Insurance was placed in administration in late 2011, has been applied on top of these increases.
As of last November, €236m has been collected from consumers via the levy.
Figures released by Mr Noonan at the time showed the insurer’s collapse would cost another €912m, with the levy likely to remain in place for a further 14 years.
The current iteration of the levy is the second time such a charge has been introduced — the first came following the collapse of PMPA in 1983.
The sector also argues that the Court of Appeal’s recent ruling — which found the Motor Insurers Bureau of Ireland (MIBI) “potentially liable” for hundreds of outstanding claims following the collapse of Setanta Insurance in 2014 — will drive the cost of premiums even higher.
MIBI is an independent organisation created by the insurance industry to compensate victims of uninsured or unidentified motorists.
The High Court had previously been asked to determine whether MIBI or the ICF was liable for the claims.
A review of the framework for motor insurance compensation in Ireland is due to be presented to Mr Noonan and Transport Minister Paschal Donohoe — or their possible successors — in the coming weeks.