“In this country, somebody is always putting their hand in your wallet.” One of the things I heard when recently filming a documentary on the rising cost of car insurance.
Between May 2015 and May 2016, the average increase in motor cover in Ireland was 35%.
Add to this the hikes in rents and you have a lot of disgruntled and hard-pressed people.
Budget 2016 delivered cuts in the Universal Social Charge and the introduction of a few tax credits, but for many families and businesspeople the benefits have been rendered irrelevant.
Here’s an example. Martin Ryan runs his haulage business just outside Raheen in Co Limerick. It has 50 trucks on the road in Ireland, Britain, and the continent every day of the week.
Last October, the minister for finance handed him and the rest of Ireland’s hauliers a massive boost. Road tax for the largest vehicles was slashed from over €5,000 to just under €900. Mr Ryan was delighted.
Overnight, his business was immediately more profitable. Then he attempted to renew his fleet’s insurance. FBD, his previous insurer, had withdrawn from the commercial market.
The best quotes available to him entailed a 60%-70% increase. The transport sector operates within single percentage margins. The tax cut may well as not have happened.
Martin has had to innovate. He spent tens of thousands of euro installing hi-tech cameras on his trucks.
On continuous record, and remotely accessible, he can check in on his drivers wherever and whenever he needs. Accidents are cleared up within moments.
It didn’t bring his premiums down so much as ensure he was able to get insurance at all. Put to him the industry’s mantra — ‘our claims are through the ceiling — we’re required to increase our reserves’— and he’s not buying it.
“Insurers saw a gap with the tax cut,” he says. “A chance to make a gain.”
Head into Limerick City and there’s Tom Hannon. He has eight taxis on the road. His quote went from €16,000 to €56,000 in 12 months.
He’s pondering what to do. Tom suspects that a failure to prepare for the severe flooding of earlier this year has left insurers to play catch-up.
There could be some truth to that.
I was standing in a scrap-yard just outside Birdhill a little later and wondering why a pristine Volkswagen Golf GT with 151 plates was up on blocks.
‘Hold on a minute’, I thought, ‘these cars don’t have a scratch’. Sprayed on the roof of around 20 motors were the letters: ‘AIG’. They had been recovered from flooding in Cork.
Immaculate on the outside; rotten on the inside.
It also seems that the insurers are correct in pointing to expensive personal injury claims. A successful whiplash claim here can result in well over €15,000. In Britain, significantly less than €5,000 is paid out.
The industry blames the legal profession too. The aggressive pursuit of claims is pushing up costs, they say.
The lads down the Law Library allege it is all about boosting profits at the expense of customers. Detailed information on claims is not made available, they add. Let’s take a look at those profits.
Aviva Ireland this week reported first-half operating profits of €43m — a 7% increase. It said its robust approach to fraudulent motor claims was bearing fruit.
And then there was RSA. It had to bail out its Irish operation a little while ago, but was still able to report an explosive 43% increase in profits.
It appears we have two issues: there are not enough operators here and regulation of the ones we do have is problematic. The collapse of Quinn Insurance and Setanta reduced the choice.
The Government would love to get another player to help drive down premiums and improve competition. But that was exactly what Quinn did in the 1990s and we saw what happened there.
That brings us to regulation. To underwrite insurance in Ireland you do not need to be resident here. Setanta, which left a €90m black hole, was regulated in Malta. Enterprise Insurance, which ceased issuing policies last month, reported to Gibraltar.
The Central Bank can ‘nudge’ regulators in those jurisdictions and ask them to keep an eye on what their companies do here. But that’s about it.
Meanwhile, premiums look set to increase again. What the likes of Martin Ryan and Tom Hannon do then, we can only guess.
Paul Colgan is Economics Editor with UTV Ireland. His Insight documentary into motor insurance airs on Monday night at 8pm.
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