The Motor Insurance Advisory Board report into the Irish insurance industry was published last April in a blaze of publicity. The report laid the blame for spiralling insurance premiums fairly and squarely at the door of the insurance industry. The Government has finally formulated its response. John Loughran says let the battle commence!

Tanaiste and Minister for Enterprise, Trade and Employment, Mary Harney recently announced that she was committed to bringing about improvements in the functioning of the Irish insurance market and said she expected that concerted Government action would be met with a positive response from the insurance industry.

The Tanaiste said she would bring proposals to Government within a matter of weeks outlying an Action Plan in response to the recommendations contained in the MIAB report. She also confirmed her intention to establish a Personal Injuries Assessment Board on an interim basis later this month.

The minister stated: "The MIAB Action Plan, preparation of which has involved input from the industry, will provide a precise road map for implementation of the recommendations contained in the report. This will include identifying the stakeholder responsible for delivery of each recommendation, a statement of the time frame for implementation and a projection of the expected impact including the impact on premiums."
She continued: "The MIAB was essentially concerned with motor insurance but the recommendations also relate to other forms of insurance and to public and employers' liability in particular.

The minister will publish the plan in full once the proposals have been brought to Government. The plan will focus on improvements to court procedures, the provision of greater information to the consumer and implementation and enforcement of the Road Traffic Acts

The Competition in conjunction with the Department of Enterprise, Trade and Employment will embark on a detailed study of the motor, employers' and public liability insurance business including the factors inhibiting foreign insurers from entering the market. The Tanaiste also confirmed that the Personal Injuries Assessment Board would be established on an interim basis pending the enactment of legislation required to put the Board on a statutory footing. "I expect to name the members of the interim board next month. The Board will concentrate on building relationships with the industry and on establishing the database of court awards in compensation cases and other preparatory work so that the Statutory Board can hit the ground running once the legislation is passed," she said.

The establishment of a database of court awards in insurance compensation claims will be critical to the work of the statutory board when it becomes operational, according to the minister. She commented: "The PIAB is not designed to reduce levels of compensation as has been unhelpfully suggested in some quarters. The Board will instead bring about reductions in the cost of delivering compensation. This will reduce insurance costs while hugely benefiting the policy holder."

The minister emphasised that her proposals would range across a number of Government Departments and she confirmed that she would oversee the implementation of a number of measures to reduce the cost of liability insurance in cooperation with other relevant ministers.

She elaborated: "My priority will be to ensure quick and concerted action in order to restore consumer trust in the insurance industry. But there is an onus on the industry itself to respond positively to new initiatives and to justify that restoration of trust."

She continued: "Private policyholders are faced with spiralling premiums for motor and house insurance, while insurance costs are a major threat to the existence of small and medium sized companies, with serious ramifications for the economy in general. "
The minister acknowledged that the insurance industry is faced with difficulties including the high level of claims and awards, poor returns on investment and difficulties in obtaining reinsurance but stated that these problems were of cold comfort to either private or corporate customers.

This news will meet with a universal welcome from road transport operators. For many years the perceived lack of competition in the marketplace has been the bugbear of the industry. It is well known that a "new player" at the behest of the Irish Road Haulage Association, is interested in entering the fray, but has been thwarted by "bureaucracy and red-tape"

Recently IRHA communications director Jimmy Quinn said that insurance costs have increased by more than 40 per cent in the past year for commercial users.
A survey conducted by the IRHA found that motor insurance increased by an average of 42 per cent, public liability insurance increased by an average of 59 per cent while goods in transit insurance spiralled by 36 per cent.

Two out of five members said that they intended to sell off vehicles to lower costs while 11 per cent said price hikes of a similar magnitude could force them out of business next year.

It may have taken the Government more than six months to formulate its action plan, but the wheels are finally turning in the right direction, and it is to be hoped, they will gather momentum in the coming months.
There is no quick fix solution to the scourge of spiralling insurance premiums, but Minister Harney appears to have the ability and most importantly the political will to tackle this crisis.
Watch this space!