How long must we wait?

Almost 18 months have passed since the Motor Insurance Advisory Board (MIAB) published its hard-hitting report into the motor insurance industry. John Loughran poses the question: How much longer must we wait for meaningful reductions in motor insurance premiums?

IIF Chief Executive Michael Kemp

The Motor Insurance Advisory Board's report into the motor insurance industry, which was supposed to be the driver for cheaper insurance for all motorists, was published in April 2002. However, some 18 months later hauliers are still being hit with crippling insurance premiums and the prospect of significant reductions seem as far away as ever.

The report stated that the Irish insurance industry was making profits at nine times the rate of their UK counterparts and made 67 recommendations aimed at reducing the cost of insurance for all classes of motorists.

The report was heralded as a blueprint for cheaper insurance and was greeted with almost universal approval. The employers' body IBEC, The Small and Medium Enterprise Association and the Small Firms' Association and the Irish Road Haulage Association gave the report their unequivocal support.

The Irish Insurance Federation (IIF) also welcomed the publication of the report and said it was committed to adopting all of the recommendations pertaining to the insurance industry.
It called on the Government, the legal profession and other relevant parties to throw their shoulders to the wheel in order to achieve sustainable reductions in the high cost of motor insurance.

The introduction of the penalty points system has contributed to a reduction in road fatalities

On the day the report was published IIF chief executive Michael Kemp ominously commented: "IIF members are committed to embracing all of the relevant recommendations of the MIAB report. However, unless and until the recommendations are collectively acted upon, the cost of motor insurance will not come down."

He continued: "All of the issues must be addressed together and in a meaningful manner if consumers are to see genuine progress in lowering insurance premiums. Accident frequency is coming down but as long as claims cost continue to rise - and this is predominantly due to the levels of compensation paid and legal costs incurred - the cost of motor insurance will remain high."

The MIAB report stated the rapid introduction of the penalty points system was key in the reduction of road fatalities and accident frequency. Progress has been made in this area - with a manual system in operation since the beginning of November 2002 - but it falls a long way short of the penalty points system envisaged by the MIAB.

The report also recommended the establishment of a dedicated and properly funding Garda National Traffic Bureau to enforce the penalty points system. Despite promises in the run-up to last year's general election, the Government has failed to deliver in this critical area.

The establishment of a Personal Injuries Assessment Board (PIAB) was also recommended by the MIAB. Some progress has been made in this area, but the board is not yet operational, and by all accounts, it won't be fully functional until the middle of next year.

It is abundantly clear that the Government has failed to deliver on the majority of the MIAB recommendations that fell within its remit. It will take at least another 12 months before the complete computerised penalty points system is finally up and running. The establishment of a dedicated national traffic corps has fallen off the Government's radar at the PIAB is still some way off.

However, the insurance industry must also shoulder a large proportion of the blame for failing to deliver cheaper motor insurance premiums. Last month the Oireachtas Committee on Enterprise and Small Business called for sweeping changes in the industry in a bid to reduce premiums.

The powerful committee, chaired by Fianna Fail TD Donie Cassidy said there wasn't enough competition in the market and called for wide-ranging reforms within the industry, including the abolition of the 2 per cent levy on insurance.

The committee's interim report also called for the introduction of penalty points for all motoring offences and the installation of speed cameras across the country. It also called for the impounding of uninsured cars.

The Oireachtas Committee on Enterprise and Small Business, when it reconvenes later in the year, will ask the insurance industry to explain why they haven't delivered on cheaper motor insurance, while their own profits continue to soar.

The Irish Insurance Federation has already been before the committee, but committee members feel they didn't receive a "full and frank explanation" of the profitability of the industry.
Some 18 months after publication of the MIAB report into the motor industry, only one insurer - Hibernian - has come up with a plan to offer cheaper insurance to motorists. From November it offer penalty point free motorists a significant discount.

Motorists with no penalty points will receive a 10 per cent reduction. There will be no increase for motorists with up to five penalty points, while those with six points will get a 10 per cent loading. An additional 5 per cent loading for each penalty over six, will also be applied.

The wheels of change are slowing beginning to move in favour of the motorist. However, for many hauliers the change can't come quickly enough.