Moves to reduce the cost of claims by the Government and a recent recovery in the equity markets will have a significant and immediate impact on premia, the Irish Insurance Federation says.
The biggest contributory factor in rising premiums is the spiralling cost of claims, but concerted and unprecedented legislation spearheaded by Tánaiste Mary Harney, Justice Minister Michael McDowell and Environment Minister Seamus Brennan, will all help to reduce the cost of motor insurance, maybe as early as this year, according to IIF spokesperson Martin Long.
“People are very quick to blame the insurance industry for the cost of insurance. But it’s a cost of claims issue. It’s a hostile commercial environment, because of the cost of claims, particularly the legal costs,” he says.
“In the year 2000, insurance companies lost €165m in this country because of the huge cost of claims. In 2001, that fell to a €17m loss. An improvement in the equities market, coupled with a reduction in the cost of claims should mean we have seen the worst of premium increases,” he said.
Tánaiste Mary Harney’s landmark move to bring the issue of insurance to Cabinet level and set up a sub-committee on the matter should reap rewards. The justice minister’s pledge to set up a new Garda Road Traffic Corps should also reap rewards.
The introduction of penalty points and the subsequent reduction in road deaths and accidents will all combine to reduce costs to the industry and to customers alike, he added.
“I believe there is a real political will there now to reform our archaic system. The legal system has been brought in, kicking and screaming,” Mr Long said.
“The whole insurance system, which is paid for by the insurers, run by the insurers and run by the Government is on its knees and it needs reform. If this does not happen, companies will become insolvent,” he said.
The Automobile Association said that Irish consumers will continue to show absolutely no loyalty to insurance companies until they start to look after their customers more and offer more reasonable quotes.
The AA’s Conor Faughnan warned that we will always have high premia until the sector is reformed.
“We will always have expensive insurance until something is done to address the amount of influence that lawyers, solicitors and barristers have and to reduce the number of accidents, the numbers suing and the generosity of our courts.
“And even if you could wave a wand and kick them all out, we would still have expensive insurance. The cost of insurance is high because the cost associated with claims and the frequency of them is also high,” Mr Faughnan said.
“The Dutch insurance market is four times the size of ours. Yet 150 companies compete there, as opposed to just five here. The same competition just isn’t here,” he added.