Two cheers for the Government’s new reform plan aimed at bringing down the cost of insurance. Not three because, in one major respect, the changes are somewhat one-sided.
At a press conference to launch it yesterday, Enterprise Minister Leo Varadkar acknowledged that insurance costs in Ireland are too high for consumers, businesses, and community organisations. Yet the plan fails to acknowledge the contribution to those costs made by the huge profits enjoyed by insurance companies in Ireland. According to Central Bank figures, insurers operating here saw profits on motor coverage go up by nine percent to €142m last year.
The cost of claims has fallen to 59% of motor premiums from a peak of 92% in 2014, yet any reduction in costs to consumers has been piecemeal and inadequate.
Insurers point out that awards are much higher here than in the UK but neglect to admit that their operating profits are almost double that of their British counterparts.
It is right that exaggerated and misleading insurance claims should face the full force of the law. However, it should also be made clear to the insurance industry that sharp practices, a failure to be open and transparent on pricing structures, or operating as a cartel in order to enhance profits will not be tolerated.
There are already two investigations at EU level into suspected anti-competitive practices in the Irish insurance industry, one by the European Commission and another by the Competition and Consumer Protection Commission (CCPC). The CCPC case, taken at the request of the Irish Government, involves an investigation into five insurers, an insurance broker, and an insurance industry trade association. Preliminary findings indicate that the parties involved engaged in a practice known as “price signalling”, a practice designed to reduce competition.
To date, reform of the sector has been at the behest of the industry itself and not consumers. The creation of the Personal Injuries Assessment Board was meant to drive down both awards and legal costs. In fact, awards through PIAB have been only marginally lower than those awarded in the courts or settled out of court.
The insurance industry is built on trust. Customers pay their premium and trust the insurer to pay their claim. Insurers trust customers to be honest and forthright in their dealings with them. But, unfortunately, trust cannot be taken for granted which is why it is necessary to have legislation to reduce fraudulent claims, including placing perjury on a statutory footing to make it easier to prosecute.
While Leo Varadkar’s plan pledges to increase protection for consumers, it mostly concerns itself with reducing the costs of insurance providers by promising to bring in new guidelines on personal injury awards and consider capping them, enhancing the role of PIAB, and reducing claims fraud.
Like other reform plans before, this one is again loaded in favour of the industry, while doing little to force insurance companies to deal with their customers fairly, ethically, openly, and honestly.