Insurance firm’s collapse could add an extra €30 to €40 to every vehicle insured

Motorists are facing a further hike in insurance premiums after being left to foot the bill for a collapsed insurance company.

The move could add an extra €30 to €40 to every vehicle insured at a time when insurance policy costs have increased by 25% in the past year with a similar rise already expected over the coming year.

There are fears it will also set a precedent that would automatically place the burden for any failed motor insurance company on ordinary drivers.

The situation arises because the Court of Appeal upheld a decision of the High Court to make the Motor Insurers Bureau of Ireland liable for an estimated €90m in claims against Setanta Insurance which went into liquidation almost two years ago.

The bureau exists primarily to assist people who suffer loss or injury at the hands of individual uninsured drivers, a responsibility that already costs €60m a year.

Those costs are funded by insurance companies which pay a subscription to the bureau, passing the costs onto their own customers as a levy on their premiums.

Bureau chief executive Patrick O’Brien warned this demand on customers would increase. “If the Motor Insurers Bureau of Ireland is required to provide for these claims, which amount to an additional 150% of our annual claims’ budget, this will have significant implications for insurers and can only further exacerbate the cost of premiums paid by insured motorists,” he said.

A further appeal to the Supreme Court is a possible option for the bureau and its lawyers were last night beginning the process of studying the Appeal Court’s detailed judgement.

However, regardless of any further court action, Mr O’Brien said he would be seeking an urgent meeting with the new government to push for changes to insurance legislation to make clear who should be responsible for collapsed insurers.

The bureau had argued in court that the Insurance Compensation Fund, which is funded by contributions from the wider insurance industry, should foot the bill. Mr O’Brien said the bureau might not be able to continue in existence with potentially devastating consequences for the victims of uninsured motorists.

Industry body, Insurance Ireland, said the effect of the court ruling was imprudent insurers would be able to go into liquidation and dump their losses on surviving insurers.

Chief executive Kevin Thompson said: “We appreciate and sympathise with the difficulties experienced by claimants who were left stranded by the liquidation of Setanta Insurance. However, we don’t support the concept of the sector being guarantors for less prudent operators.”

About 1,750 claims by and against Setanta policyholders were left in limbo when the Malta-based firm was wound up in April 2014.

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