With motor insurance prices now 16% higher than they were 12 months ago, Transport Minister Paschal Donohoe says he hopes measures to reduce road deaths and injuries will lead to a drop in the premiums being faced by motorists.
However, industry experts have predicted that every motorist opening their insurance renewal premium this year is going to see an increase of 15%-20% in the cost of their cover — and the number of accidents is responsible for only a small part of that rise.
Mr Donohoe, in answer to a parliamentary question from Independent TD Noel Grealish, said he was concerned at the recent rise in insurance premiums, but pointed out that the cost is still more than 15% below the levels of 2003.
“The establishment of the Injuries Board in 2003; the enactment of the Civil Liabilities and Courts Act 2004; and the improvement in road safety have all been significant factors in reducing motor insurance costs over the past decade or so,” he said.
Mr Donohoe said insurance was provided by private companies in an open and competitive market and he had no role in regulation of insurers. He said he was confident the implementation of measures under the 2013-20 road safety strategy would reduce collisions and further assist in cutting the insurance cost.
“Encouragingly, as of May 8 there were 14 fewer deaths as a result of road collisions than in the same period last year,” he said.
Conor Faughnan of the AA said Mr Donohoe was correct that a key mechanism for reducing insurance premiums was a reduction in crashes.
“But road safety is not the only issue pushing up the cost of motor insurance,” he said. “It is not what people are feeling and it is not what is causing concern. You have a large number of motorists who are opening their envelope with their renewal notice and thinking, ‘What? — I was 41 last year, now I am 42, I still have no penalty points and I have not crashed yet my price has gone up 20%?’”
Mr Faughnan said a 20% jump year-on-year is not properly explained by a rise in crashes and increase in claims costs, but added that they were contributory factors along with the “insidious upward creep” in the legal costs for settling insurance claims.
“What the insurance industry collectively tends to do is move in roughly seven-year cycles.
“Over that time, you will have periods where it is seriously competitive and motor insurers are cutting prices way, way down. There can be kamikaze pricing. They only realise that as the next seven years unfolds and they pay the claims. Nevertheless they are very disruptive in the market while that is going on.
“We did have something of a price war for Irish motor insurance which ran for a couple of years and pushed it down unsustainably low and unnaturally low.”
Mr Faughnan added: “Partly what is happening at the moment is a correction for previous underpricing and it is cyclical. It is a competitive market which is the consumer’s best defence, but markets have to be healthy before they can be competitive.
“Unfortunately if you look at the insurance landscape there have been some big players perform badly or have shocks to the system or retreat from motor insurance altogether. FBD is pulling out, RSA had its issues a couple of years ago.
“If you go further back still, the Quinn failure still haunts us.”
© Irish Examiner Ltd. All rights reserved