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Tithe an Oireachtais An Comhchoiste um Fhiontraíocht agus Mionghnóthaí An Naóú Tuarascáil An Tuarascáil Deiridh maidir le hAthchóirithe ar Mhargadh Árachais na hÉireann Márta 2007 Houses of the Oireachtas Joint Committee on Enterprise and Small Business Ninth Report Final Report on Reforms to the Irish Insurance Market March 2007 CONTENTS
Appendix A Witnesses at Meetings on Insurance Reform with the Joint Committee on Enterprise and Small Business Appendix B Categorisation of Recommendations in the Third Interim and the Road Safety Reports i Chairman’s ForewordThe publication of the Final Report on Insurance Reform by the Joint Committee on Enterprise and Small Business shows the success of the insurance reform programme. The Joint Committee sustained its commitment to the cause of insurance reform over the past four years. Since the publication of our First Interim Report, there have been significant reductions in the level of insurance premiums and improvements in the environment in which insurance companies operate. The Joint Committee expresses its appreciation of the support given by Government Ministers, including Mr Michéal Martin, T.D, the Minister for Enterprise, Trade and Employment, Mr Michael McDowell, T.D., the Minister for Justice, Equality and Law Reform, and Mr Martin Cullen, T.D., the Minister for Transport. We also wish to express our thanks to those in the insurance industry and all of the other persons who made presentations to the Joint Committee during 2006. The Joint Committee also wishes to thank O’Reilly Consultants who assisted the Joint Committee in its evaluation and analysis of the evidence given and the Committee Secretariat for its support throughout this project. In adopting this Final Report, the Joint Committee of the Twenty-ninth Oireachtas has completed its work on insurance reform. The Joint Committee requests that the Joint Committee of the 30th Oireachtas prepares a report in about two years on a number of recommendations that have not yet been implemented. I wish to thank especially all of the Members of the Joint Committee for their support and hard work to ensure that insurance costs in Ireland would be reasonable for consumers and internationally competitive. Donie Cassidy, T.D. Chairman Joint Committee on Enterprise and Small Business 14 March 2007 ii Members of the Joint Committee on Enterprise and Small Business
iii Committee on Enterprise and Small Business Orders of
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Year |
Dwellings |
Motor Cycles |
Private Motor Cars |
1997 |
3% |
2% |
3% |
1998 |
2% |
35% |
4% |
1999 |
3% |
22% |
6% |
2000 |
4% |
0% |
9% |
2001 |
10% |
18% |
17% |
2002 |
16% |
38% |
13% |
2003 |
4% |
17% |
-1% |
2004 |
-1% |
15% |
-12% |
2005 |
-5% |
1% |
-10% |
2006 |
-7% |
0% |
-7% |
End 2006 compared to average 2006 |
-4% |
0% |
-4% |
Increases average 2006 compared to average 1996 |
29% |
272% |
20% |
Source: Central Statistics Office (CSO) Special Report: January 2007
Months of Significant Changes
Year |
Dwellings |
Motor Cycles |
Private Motor Cars |
1997 |
|||
1998 |
+May/July/Sept +Oct/Nov/Dec |
||
1999 |
-Aug |
||
2000 |
+Oct/Dec |
+Dec |
|
2001 |
+Feb/Mar +Nov/Dec |
+Sept/Oct/Nov |
+Jan/Mar/Apr +Oct/Nov |
2002 |
+July |
+May/Oct |
|
2003 |
+April |
+Jun -Nov |
-Sept/Oct/Nov |
2004 |
+Feb |
-Sept |
|
2005 |
-Jan/Mar/Aug |
-Nov |
|
2006 |
-Jan/Jun/Sept/ Nov |
-Sept |
Comment
Over the ten years from 1996 to 2006, increases in the costs of insurance have been:
Dwellings: +29%
Motor Cycles: +272%
Motor Cars: +20%
Motor cycle insurance is a small part of the total market. However, the increases have been extraordinary and there have been almost no reductions in costs.
For Dwellings and Private Motor Cars, it is clear that the major increases took place in 2001 and 2002. Costs fell in 2005 and 2006 and were continuing to fall at the end of 2006.
This information is produced by the CSO as part of the Consumer Price Index. There is no similar information available for commercial motor or liability insurance (employer’s liability and public liability) as they are not consumer expenditure.
The increases in the cost of insurance caused a major public outcry. The Joint Committee in its first report reported on the evidence received of the effects of the rapid increases in insurance costs. Appendix B3 from the first report, ‘The Burden on Business – the Case for Change’ is reproduced below.
Businesses have experienced enormous increases in the cost of insurance over the past few years. According to an SFA (Small Firms Association) survey, 92 per cent of businesses regarded insurance costs as a significant business problem. Evidence presented to the Committee in written submissions and during oral hearings has shown the extremely large percentage increases.
The IHF (Irish Hotels Federation) stated that the results of one of its surveys showed that the mean increase in members’ premiums between 2000 and 2003 was 351 per cent. According to the IHF, between 2000 and 2003, excesses on insurance policies have increased by over 2000 per cent. According to the IHF and others, no matter what steps businesses take to manage and reduce risk, there is little or no impact on the premiums charged. This may lead to a situation where businesses no longer see the benefit of striving to eliminate risk.
ISME (Irish Small and Medium Enterprises Association) stated that their members experienced an average increase over the past 2 ½ years of 290 per cent and that businesses spent an average of 2.5 per cent of their turnover on premiums. Approximately 10 per cent, or 350, ISME members are self-insured and a recent article in The Sunday Times indicated that 10,000 Irish businesses were uninsured. As a result of being uninsured, the directors of these companies are personally liable for accidents that occur on their premises. ISME stated that high insurance costs were acting as a barrier to startups and thus stifling wealth creation.
According to SFA, many businesses now have to borrow to pay their insurance premiums.
According to AIR, (Alliance for Insurance Reform) the dramatic rise in insurance costs and the difficulty experienced by many businesses in finding insurance quotes have already forced the closure of a number of businesses and led to a loss of employment. In a recent ISME survey of 1,000 companies, 400 companies stated that they anticipated job losses.
IBEC (Irish Business and Employers Confederation) stated that high insurance premiums had a significant effect on business because:
The Joint Committee discussed the position with the insurance companies in detail and received many submissions outlining the reasons why insurance costs increased so dramatically. In addition, the Competition Authority carried out a wide-ranging study to try to determine the reasons for the rapid increase in insurance premiums.
Arising from the studies undertaken by the Competition Authority and its external consultants, it seemed that there were two main factors that gave rise to the very sharp increase in premiums for employers and public liability insurance.
The explanations given to the Joint Committee by the insurance companies included:
Undoubtedly, the insurance companies were influenced to increase prices by their results over the previous five years.
Underwriting Results of Insurance Companies
Class of Insurance |
Loss Years |
2001 |
2002 |
Private Motor |
1998–2002 |
-€107m |
-€9 m |
Commercial Motor |
1998–2001 |
-€67m |
+€28 m |
Household Property |
1998; 2000–2002 |
-€44m |
-€53 m |
Commercial Property |
1998–2000 |
+€11m |
+€86 m |
Employer’s Liability |
1998–2002 |
*-€55m |
*-€60 m |
Public Liability |
1998–2002 |
*-€100m |
*-€50 m |
It can be seen from the above that the underwriting results (before taking into account income from investments) of the insurance companies were poor, with losses on most classes of insurance each year.
Source: Insurance Industry Federation Fact File on website
The increases in insurance costs gave rise to very considerable Government concern.
The Motor Insurance Advisory Board (MIAB), which had been established in September 1998 under the chair of Ms Dorothea Dowling, published its report on the high costs of motor insurance in April 2002. The Government accepted the report’s findings and took steps to implement the recommendations. The Government Insurance Market reform programme included the following:
The Joint Committee, in response to public concern about the issue of insurance, agreed on 29 January 2003 that it would consider arrangements put in place by the Department of Enterprise, Trade and Employment under the Government programme to reform the insurance market, especially with regard to the high cost of insurance to drivers and small businesses. The Joint Committee commenced a series of oral hearings from invited organisations and individuals on 19 June 2003. The Joint Committee had received 47 submissions in response to an advertisement placed in the Sunday newspapers. The Joint Committee’s first report was published in July 2003. In its report, the Joint Committee made 40 recommendations in relation to reforming the Irish insurance market.
In addition to meeting with those who complained about the high increases in insurance costs, the Joint Committee has met, each year, with each of the five major insurance companies. All of these meetings have been in public session and many have led to publicity about insurance costs and the actions being taken by the insurance companies and by Government to reduce these costs.
Since 2003, the following developments have taken place:
The Joint Committee made 87 recommendations prior to this report. Of these, 29 were made in the July 2006 Report on Road Safety. Most of these recommendations have not yet been accepted or rejected. Of the remaining 58 recommendations, only two have been rejected. However, 16 recommendations have yet to be implemented and the Joint Committee requests its successor Committee, in the 30th Oireachtas, to inquire into the implementation of these 16 recommendations during late 2008 or early 2009.
In this report the Joint Committee records many of the statements made by those giving evidence during 2006. The report makes six recommendations:
The Joint Committee has devoted a significant amount of its time to insurance reform due to the importance of the issue for consumers and businesses.
The Joint Committee is particularly grateful to all of those who gave evidence to it and provided many of the ideas on which the recommendations were based. In particular, the Joint Committee expresses its gratitude to the insurance companies for their cooperation. The Joint Committee is very pleased indeed that insurance costs have fallen so substantially between 2003 and now. The Joint Committee played its part in bringing about an extraordinary level of reforms in insurance and road safety in the Irish market. It was the agreement by members of the Joint Committee on the need for reforms that led to the speedy enactment of the legislation presented by Government to the Oireachtas.
The continuing fall in insurance premiums is an indication that the insurance market is now a competitive market. However, this has been achieved without a substantial new entrant. Nevertheless, the two Irish-owned companies, Quinn Direct and FBD, have provided significant competition to the other major companies operating in the Irish market.
The success of the insurance reform programme is a good example of what can be done when Government, an Oireachtas Joint Committee and industry work together to achieve results for the benefit of consumers and of business.
We examine in the report 15 general recommendations that have yet to be implemented. There is a lot more to be done. It is important that the reductions in insurance premiums should not delay or postpone reform of the market.
Furthermore, the success of two important reforms, the establishment of the PIAB and the enactment of the Civil Liability and Courts Act 2004 is by no means assured. It will take Government vigilance and a willingness to bring in amending legislation, if required, to ensure that insurance companies and policyholders continue to benefit from these changes.
The introduction and developments chapter records the developments that have taken place since the publication of the Third Report in January 2006. Among these developments were the publication, by the Minister for Justice, of the report on Ways of Reducing the Costs of Civil Litigation, the publication by the Competition Authority of its report on the legal professions and the publication of the Consumer Code by the Financial Regulator.
Important developments on road safety included the establishment of a Ministerial Committee to oversee road safety policy and the establishment of the Road Safety Authority.
The Joint Committee published a Report on Road Safety at the end of July 2006. This report contained 29 recommendations. While the recommendations have generally been welcomed, the Joint Committee is awaiting the publication of the Road Safety Strategy for the years 2007 to 2012 to ascertain whether or not they have been accepted.
In addition, the Joint Committee recommends that the Road Safety Authority require certain safety features to be fitted as standard to all vehicles imported after 31 December 2008. (Recommendation 59)
In general, insurance companies are making a significant contribution to road safety and to health and safety at work. However, it is always possible to do more and the Joint Committee has made a number of recommendations to the insurance companies that it believes will lead to further reductions in fatalities on the roads and at work.
The Joint Committee is concerned that the expert group, that it requested should be established to consider the level of awards in the Irish Courts compared with those in other countries, was not established during the last four years. The review of Irish awards, compared with those of other countries, is of critical importance if Irish insurance costs are to be competitive with those that exist elsewhere.
The Joint Committee obtained information from the Motor Insurance Bureau of Ireland. This showed that Ireland has the highest level of uninsured drivers in the EU.
The Joint Committee considers that it is possible to bring about further reductions in insurance premiums if the trend in the reduction of fatalities on the roads and in the workplace continues, and if the level of awards is reduced to comparable levels. In addition, actions to reduce the level of uninsured drivers and to implement the reports on the reduction of legal costs will be of considerable assistance in the further reduction of insurance premiums.
In addition, the Joint Committee is concerned that there is no agency clearly responsible for motor vehicle and driver records. It is essential that the Gardaí should have access to a database of motor vehicle and driver records if the level of uninsured drivers is to be reduced, and if road safety standards generally are to be improved. (Recommendation 64)
There are, however, 15 recommendations that should be implemented in the future and that need to be monitored by the Joint Committee of the 30th Oireachtas. Such monitoring can take place at any time, but it may be that a review in about two years’ time would be appropriate. The report lists the recommendations that are to be implemented in the future and comments on each of them.
In addition to the 15 recommendations, there are over 25 recommendations on road safety that were made in the July 2006 report that await implementation. These should also be reviewed in about two years.
The Joint Committee on Enterprise and Small Business published its First Interim Report on reforms to the insurance market in early August 2003, its Second Interim Report in July 2004, its Third Interim Report in January 2006 and a Road Safety Report in July 2006. This report is the Final Report of the Joint Committee in relation to insurance reform.
A list of the recommendations in all of the reports is given by category in Appendix B.
The Joint Committee appointed O’Reilly Consultants (218, Lower Kilmacud Road, Dublin 14) in April 2006 to provide further support during this series of oral hearings and to draft its Final Report on Insurance Reform.
The Joint Committee held a series of oral hearings with invited organisations, commencing in May 2006 and finishing in November 2006.
A list of the organisations and individuals who attended hearings of the Joint Committee is included in Appendix A.
Following each hearing a report was circulated to the Members of the Joint Committee. The transcripts of the hearings are published by the Editor of Debates. Video and tape recordings of the hearings are also available.
The Joint Committee commenced meeting witnesses for its Final Report on Insurance Reform in May 2006 and held three meetings with witnesses representing nine organisations during May and June. As part of its work, a delegation from the Joint Committee undertook a visit to the United States in June 2006 in relation to road safety. During its visit, the Joint Committee had ten meetings on different aspects of road safety in Chicago, Iowa, Maryland, Washington, Tennessee and New York.
In early July 2006, 11 people were killed in road crashes in one weekend; the number of fatalities on Irish roads (200) for the first six months of 2006 was higher by 18 than the number of fatalities in the first six months of 2005 and 2004. The media reported widespread public concern about road safety. For this reason, the Joint Committee decided that, instead of waiting until September to publish its Final Report on Insurance Reform, of which road safety would be a part, it should publish a report on its conclusions on road safety as soon as possible so that remedial actions could be taken by the appropriate authorities.
Motor insurance premiums partly reflect the level of motor vehicle collisions. One important aspect of reducing insurance premiums is to reduce the level of collisions and, in particular, the level of fatalities on Irish roads. In publishing its report, the Members of the Joint Committee were, however, primarily motivated by a desire to see a significant reduction in the number of fatalities and serious injuries on Irish roads.
The following developments have taken place since the Joint Committee published its January 2006 report.
The most important developments were in relation to:
Further information on each of these is set out below:
The Minister for Transport announced that a new high-level Government Road Safety Group was established, comprising:
The establishment of a body with specific responsibility for road safety is a significant development in relation to road safety in Ireland. The Road Safety Authority was established by Ministerial Order on 1 September 2006.
Among the functions of the Authority are:
The Road Traffic Act, 2006, makes provision for a number of road traffic issues including:
On 21 July 2006 the following came into force following a Ministerial Order:
The Minister for Transport introduced 31 new penalty point offences in April 2006. All offences having an effect on road safety are now subject to penalty points. A fixed-charge penalty point system (FCPS) commenced on 3 April 2006 and the Gardaí commenced issuing notices for a wide variety of offences.
The strength of the Garda Traffic Corps increased from 520 in January 2006 to 745 in November 2006. A further 455 members are to be allocated to the Corps, leading to a membership of 1,200 by 2008.
Following the Ministerial Order, the Garda Traffic Corps immediately commenced random breath testing. This had a dramatic effect on the number of fatalities during the remainder of 2006.
RTE’s Prime Time presented a programme in January 2007 on “boy racers”. The programme showed the extent of the problem and made a strong case for action by the Gardaí and Government if this problem is not to result in a further loss of life.
The Speed cameras will begin to operate during 2007.
Publication of, and action to implement, the Road Safety Strategy for 2007–2012.
Level of Fatalities
Year |
First Six Months |
Second Six Months |
Annual |
2001 |
185 |
226 |
411 |
2002 |
188 |
188 |
376 |
2003 |
172 |
163 |
335 |
2004 |
182 |
192 |
374 |
2005 |
182 |
215 |
397 |
2006 |
199 |
169 |
368 |
The numbers of fatalities in 2006 were the second lowest since 1965.
In addition, the fatalities in the second six months were very close to the level in the second six months of 2003, the lowest level since 1963.
As random breath testing did not commence until the relevant sections of the Road Traffic Act 2006 came into force on 21 July 2006, it would be reasonable to exclude July from the comparison.
Year |
August to December |
Change |
2001 |
185 |
|
2002 |
146 |
-39 |
2003 |
131 |
-15 |
2004 |
154 |
+23 |
2005 |
174 |
+20 |
2006 |
130 |
-44 |
The period August 2006 to December 2006 showed the lowest level of fatalities of any five months in the past six years and, possibly, since the early 1960s. If the average of August to September were to apply for a year, the number of fatalities would be 310, very close to the Road Safety Strategy target of 300. The improvement has continued in 2007 with 56 fatalities up to 9 March 2007 - an annual rate of 300.
A great deal has, therefore, been achieved. Undoubtedly, the introduction of random breath testing, which was made possible by the provision of a dedicated Traffic Corps, has been the principal reason for the reduction in fatalities but there were other reasons also:
the increased publicity given to road fatalities by the media.
Undoubtedly, the level of fatalities was lower in 2003, following the introduction of penalty points, than in 2006. The reduced level of fatalities lasted for the year from October 2002 to September 2003 when the number of fatalities was 315. An important question is whether the present reduced level will continue into the future.
It is almost certain that the most important measure to be continued for the foreseeable future is the random breath testing conducted by the Traffic Corps. If this continues for some years, it may be possible to bring about a historic and significant reduction in the level of fatalities on Irish roads. However, random breath testing alone will not be sufficient to continue the trend of the last six months. It is essential that there is:
This report was published on 27 July 2006. The report made 29 recommendations. These are given in Appendix B of this report.
Since the publication of the report the Joint Committee has met with the Minister for Transport, the Chief Executive of the Road Safety Authority, the Assistant Commissioner of An Garda Síochána, responsible for the Traffic Corps, and the Allianz Insurance Company. Reports of these meetings, in relation to road safety, are included in this chapter.
Comment on the Report by the Chief Executive of the Road Safety Authority
The Joint Committee’s Report on Road Safety was discussed by the Board of the Road Safety Authority at its September meeting. The Board was very welcoming of the report and spent 90 minutes discussing it. The report will provide an input to the Road Safety Strategy for the next three years, due to be published early in 2007.
Comment on the Report by the Assistant Commissioner
Assistant Commissioner Rock stated that he agreed with all of the recommendations in relation to young people, provisional licences, culture, etc., in the Joint Committee’s Report on Road Safety.
Comment by the Minister for Transport
‘I have noted the recommendations of the Joint Committee published in the Fourth Interim Report on Reforms to the Irish Insurance Market and Road Safety. I welcome all constructive suggestions which can lead to improved road safety and create a more robust motor insurance environment.’
Overview of Implementation of the Recommendations
A review of the 29 recommendations shows that some were implemented seven months later. It is understandable that not all of the recommendations were implemented in such a short time. The Joint Committee clearly wants to see these recommendations implemented so as to reduce the level of fatalities.
The Joint Committee notes the following developments:
Clearly, however, there are many more recommendations to be implemented.
In particular, the Joint Committee quotes from the Overview / Executive Summary of its Road Safety Report:
Road safety policy should assume that driver errors are inevitable. Roads should be engineered to ensure that driver errors do not result in fatalities; motor vehicles should be engineered to reduce the possibility of driver error and to reduce the likelihood of death where an error does occur.
The engineering of roads and of vehicles, in general, have not been sufficiently highlighted as reasons for road fatalities. We hope that the Road Safety Strategy for the years 2007 to 2009 will address these issues.
Among the findings of the Road Safety Report were:
Meeting with the Road Safety Authority and the Garda Traffic Corps on 8 November 2006
Mr Brett on behalf of the Road Safety Authority stated:
A KEY FACTS
B KEY MESSAGES
C BENEFITS
In his cost-benefit analysis of investing in road safety, Mr Peter Bacon, Economist, clearly demonstrated that for every €1 invested in road safety there would be an €8 return.
The benefits of reducing collisions, deaths and injuries are the:
The core objective of the Government’s Road Safety Strategy 2004–2006 was to reduce road deaths to no more than 300 by 2006. This is equivalent to 25 road deaths per month. In 2005, 396 people were killed on our roads, an average of 33 deaths a month.
For every death, which costs the State €2.2 million, there are eight serious injuries, each costing €300,0001 (2004 figures). In 2004 road deaths cost the state €1.2 billion.
The NRA tells us that the actions of road users are to blame for the carnage on our roads.
RESPONSIBLE FOR FATALITIES ‘Factors contributing to a large extent’
Road User Road ‘Behaviour’ accounts for 92.2% of fatalities
Source: NRA data, factors contributing to a large extent where specified, 1514 Ks (Specified)
Road deaths in Ireland are over seven times greater than the number of persons murdered. Ireland’s Road Safety Strategy is working. Since 1990 there have been 9,515 fewer deaths and serious injuries. This represents an economic saving of €2,829,356,230.
Road Carnage In Perspective 2005
ROAD VICTIMS KILLED/SERIOUSLY INJURED 1990-2004
GROWTH IN LICENSED VEHICLES 1990-2004
This has been achieved in spite of a 100 per cent increase in the number of registered vehicles in the state since 1990.
What is happening on our roads is no accident. The main causes are:
As can be seen from Table 1, National Roads, while accounting for a mere 6 per cent of our road network, account for 48 per cent of all traffic volume and 40 per cent of fatal crashes. Regional and Local Roads represent 94 per cent of the network and account for 52 per cent of traffic volumes and 60 per cent of fatal collisions.
Table 1: Percentage of Collisions by Road Type (NRA)
Road Type |
Kms |
% of Network |
% Fatal Collisions |
% Traffic Volumes |
National Roads |
5,500 |
6% |
40% |
48% |
Regional and Local |
89,500 |
94% |
60% |
52% |
Total |
95,000 |
100% |
100% |
100% |
The Government is committed to reducing road deaths and injury through:
The successful reduction of road casualties throughout the EU has been achieved by focusing on the following enforcement activities:
The success of these actions in the EU can be clearly shown.
Penalty Points
During the period July to October 2006 there were 30 fewer deaths than during this period in 2005. This is a 21 per cent drop in road fatalities.
This is similar to the reduction of fatalities that took place in Switzerland as a result of random breath testing. However, it will be necessary to wait for three or four years to see the data arising from road accidents to determine definitively whether the drop has been caused by random breath testing.
The aim of the penalty points system is to save lives and reduce injuries on our roads. It is a voluntary system. To get penalty points a driver has to break the law.
On 3 April 2006 the administration of the penalty points system changed significantly. Most notably, the Garda fixed-charge payment system is now fully computerised and the Garda ‘Pulse’ system linked to the courts. There are now 35 offences attracting penalty points. This will undoubtedly enhance the efficiency of the system and hopefully its effectiveness in acting as a serious deterrent for drivers. Up to now, the system was administered on a manual basis.
In addition, an extra 240 Gardaí have joined the ranks of the Traffic Corps and an extra 28 Garda Traffic vehicles took to the roads in 2006. This increased the number of Gardaí in the Traffic Corps to 805 in 2006.
The Government has taken a decision to establish a public sector body, the Road Safety Authority (RSA), to take responsibility for a broad spectrum of road safety issues. The RSA will bring together key elements of road safety, including driver education, road safety promotion, driver testing, driver licensing, vehicle standards, research, etc. The RSA has a clear mandate to focus on this essential function.
The RSA was formally vested on 1 September 2006 and is now accountable for the delivery of the following statutory functions:
In addition, the RSA is responsible for producing and coordinating the Road Safety Strategy.
The RSA currently has a number of initiatives underway, including:
The Board of the Road Safety Authority will review the draft Road Safety Strategy for the three years from 2007–2012 with a view to publishing it in early 2007.
Assistant Commissioner Rock, speaking for An Garda Síochána, on 8 November 2006 stated the following:
‘Additional personnel have been allocated to the Traffic Corps throughout the year. The current strength stands at 745. By the end of the current year there will be an additional 60 personnel allocated to the Traffic Corps, bringing the total strength to 805.’
‘Garda enforcement activity is continuing to be enhanced through the allocation of additional personnel and resources. The fixed-charge system was extended significantly on 3 April 2006 and if errant motorists opt to pay fixed charges this should reduce the amount of time spent in court, thus enhancing our enforcement capability. Over 20,000 fixed-charge notices have been issued in respect of these new penalty point offences.
I hope that the long-term effect of the fixed-charge / penalty point system will be an improvement in the compliance culture and, as a consequence, a reduction in road collisions, fatalities and injuries.
In view of the contribution of speed to collisions on our roads, speed enforcement plays a significant part in our enforcement strategy. In 2005 the number of fixed-charge notices issued for speeding totalled 143,651. Provisional statistics indicate that number has already been exceeded in 2006, with almost 152,669 fixed-charge notices issued for speeding offences committed between the 1 January and 30 September 2006.
Seat belt detections have also increased this year. Provisional statistics for the first ten months of the year show that 20,070 fixed-charge notices have been issued compared to 18,084 for all of 2005.
The use of hand-held mobile phones while driving became a penalty point offence on 1 September 2006. Provisional statistics show a total of 2,525 fixed-charge notices issued for alleged offences committed up to the end of October.
The question of having a tiered penalty points system has been raised. The safety camera project will roll out next year and I believe this issue should be reviewed with the benefit of experience gained with the outsourcing of safety cameras.’
‘The legislation underpinning Mandatory Alcohol Testing (MAT) was introduced on 21 July 2006 and has been extremely helpful to the Garda organisation in tackling drink driving.
The general public has willingly accepted this legislation and this acceptance is witnessed on a daily basis by Garda personnel at MAT checkpoints. Provisional statistics indicate that over 100,000 breath tests have been conducted at MAT checkpoints.
There were 14,211 Detected Drink Driving Incidents recorded on PULSE from the 1 January 2006 to 31 October 2006 compared to 10,613 for the corresponding period in 2005, an increase of 34 per cent.
The following tables show how drink driving detections have increased significantly since the introduction of MAT checkpoints, when compared to the same period in 2005.
August 2005 |
August 2006 |
|
Detected Drink Driving |
976 |
1480 |
Incidents Recorded on |
||
PULSE |
(+51%) |
September 2005 |
September 2006 |
|
Detected Drink Driving |
935 |
1602 |
Incidents Recorded on |
||
PULSE |
(+71%) |
October 2005 |
October 2006 |
|
Detected Drink Driving |
1267 |
1816 |
Incidents Recorded on |
||
PULSE |
(+43%) |
In spite of our enforcement and the media / educational campaigns conducted with our partners in road safety, unfortunately the statistics overall indicate that a culture of drink driving still exists.’
‘When an arrest takes place for a drink driving offence there is a significant knock-on effect in terms of Garda hours lost to visible enforcement. A recent study of a sample of drink-driving detections showed the total Garda time spent processing a drink-driving case from arrest through to court hearing ranged from 40 to 100 hours. This included over 20 hours spent by the arresting Garda on file preparation, statements, notification of witnesses and court appearances.’
‘Between 1 January and 21 July 2006, the date the Mandatory Alcohol Testing (MAT) provisions came into effect, there were 20 more people killed on our roads when compared to the corresponding period in 2005. Between 1 January and today there have been 315 people killed on our roads, 14 less when compared to the corresponding period in 2005. The number of fatal collisions to date in 2006 is 25, less than for the corresponding period in 2005.
While the rate of fatal road traffic collisions has fallen significantly, it is too early to assert that there is a sustained trend.
Additional resources have been deployed to enforcement of drink-driving legislation, particularly at weekends during the hours of 12 a.m. to 8 a.m. These days and hours of the week have been selected because of the disproportionate level of road fatalities to traffic volumes at these times. I am also conscious that the incidence of drink driving detected tends to follow the incidence of fatal collisions during these hours.’
4 Speed Cameras
‘Work has commenced on the necessary procurement process to engage a service provider. Given the complexity of the process and in order to ensure adherence to EU and national procurement regulations, including the prescribed time periods, procurement support services required to facilitate the outsourcing process have been engaged.
The preparation of a call to the market for expressions of interest in tendering for the project is almost complete and will issue within a matter of days. Following the call for expressions of interest, a number of candidates will be awarded pre-qualification status and shortlisted to proceed to the next stage. A request for tender will be made to the shortlisted candidates, and the successful candidate will be selected on the basis of the tenders received. In parallel with this process, work is ongoing between An Garda Síochána and the National Roads Authority on identifying locations that have a speed-related collision history. If the plan runs to schedule the service provider will be operating safety cameras by the end of the second quarter of 2007.’
Assistant Commissioner Rock stated that uninsured vehicles confiscated in 2005 were 12,643. Since 1 July 2006, 444 foreign-owned vehicles had been seized.
The Chairman, Mr Donie Cassidy, T.D., asked for Mr Brett’s views on the Joint
Committee’s Report on Road Safety of July 2006. He also asked about:
The Chairman stated that he was very pleased that the numbers planned for the Garda Traffic Corps had been exceeded and that the Gardaí were implementing the random breath testing so successfully.
Mr Brett stated that the Authority had a staff of 309, of whom 275 had transferred from the Department of Transport and the balance from the NRA. In addition, the National Safety Council budget of €6.5 million had been taken over. Mr Brett was currently involved in discussions with the Department in relation to the estimates. Early indications were that a satisfactory budget for 2007 would be agreed.
On the Joint Committee’s Report on Road Safety, this had been discussed by the Board of the Road Safety Authority at its September meeting. The Board was very welcoming of the report and spent 90 minutes discussing it. The 29 recommendations were examined. The recommendations would be considered in the formulation of the new Road Safety Strategy.
On the question of testing for drugs, Mr Brett had met with the Irish Medical Organisation and the Health Service Executive (HSE). This was being watched very carefully. There was best practice in the UK in relation to this issue. It would be helpful for the HSE to issue similar advice. In Australia there was a saliva test for drugs, administered at road checks.
Assistant Commissioner Rock stated that he agreed with all of the recommendations in relation to young people, provisional licences, culture, etc., in the Joint Committee’s Report on Road Safety.
On “boy racers”, the Gardaí were increasing enforcement at weekends. There is a covert operation in place. A video has been prepared for concerts, etc., and for a school education programme.
At the time of giving his evidence, 105 persons between the ages of 16 and 25 had been killed on the roads. In Tipperary, a programme had been developed whereby Gardaí talked to boy racers. The suggestion was that this would be done nationally.
Deputy Callanan referred to the three Es (Education, Enforcement, Engineering). He believed that not enough had been done on education. The Gardaí should be going into colleges and schools and talking to 16–25-year-olds in an effort to move them away from a speeding and drink culture. The driver test should be part of the school curriculum. It was vital to get the driver testing backlog down to six weeks. All drivers should have training before starting to drive. Deputy Callanan also mentioned the road safety week then being launched in NUIG; he believed that we have gone a bit soft on engineering, that local authorities need to look at the state of the roads and that, in particular, hedges need to be cut – it was important to be able to see around bends. There were serious difficulties with some bridges and some bad stretches of road and nothing was being done in relation to them.
Senator O’Toole referred to the position in Sweden and France. He believed that we should change our driving to the correct side of the road. This would make it easier for cars coming from other countries. In France there were a significant number of speed cameras and motorists were advised of their presence about a half-a-mile before coming to them. There were two speed limits, a wet limit and a dry limit. There seems to be no difficulty with this. In France also there are no left-hand turns. The right-hand turns are the cause of a high number of accidents in Ireland. There was a difficulty with the merged lane when turning off at junctions. There was a lack of rest areas. There was an issue of fatigue between 2 p.m. and 4 p.m. He believed that the driver test was appalling. There was no overtaking manoeuvre and no motorway driving competence included in the test. Some element of licensing was needed for driver testers.
Mr Brett stated that he agreed with the issue of education. There would be a focus on the use of seat belts and professional driving in campaigns being organised by the RSA. He was concerned that they were not really getting at the third-level sector. He was working with the Department of Education and Science. It would be useful to have ten modules in Transition Year. He noted that 5 of the 29 recommendations in the Joint Committee Report referred to education and training. He also stated that the RSA was working with the Trade Unions and employer groups to improve the training of professional drivers. He believed it was necessary to provide for rest places.
He would like to see a review of speed limits throughout the country. He would enquire into the issue of merging lanes on motorways.
On driver testing, the RSA was very concerned and they would like to see that being dealt with as soon as possible.
Assistant Commissioner Rock stated that the Gardaí would design a sensible system in relation to the speed cameras to be deployed. The public would be educated and informed prior to the cameras coming into effect. There would be visible enforcement signs on marked sites. It was important to get the message across that this was not a revenue exercise. The Gardaí would have to have a rational basis for the selection of sites. Research indicates that speed is probably the number one cause of fatal crashes. In France the introduction of speed cameras had a dramatic effect on the reduction of fatalities.
Senator Coughlin asked how many speed cameras were in operation.
In response, Assistant Commissioner Rock stated that there were 20 sites with three cameras actually working at any one time. These sites were overt sites. In addition, the Gardaí had 490 handheld units. There were 6 vans in operation; these were being increased to 14. There may be 5,000 sites in the future. Gardaí are trying to find the areas that are best suited for this purpose.
Deputy Moynihan-Cronin referred to the education of children. She stated that the best way to do this was by persons of their own age. These should be brought in to speak to young people. She was concerned about foreign drivers, ‘Are they actually subject to the law in Ireland?’ In her own county of Kerry, there are many tourists and the issue is whether they are subject to the law. She wanted the RSA to work with local authorities in relation to cutting hedges. Many road signs are filthy; tourists have to stop in order to see what is on the sign. It was important that the RSA liaise with local authorities on these issues. In relation to seat belts on school buses, her information was that children were not using the seat belts because of bullying by their peers. There was a need to call on the operators to randomly check that the seat belts were being used and for inspectors to come on the buses. There was a need to teach people how to drive on roundabouts. Much of the driving on roundabouts was frightening.
Deputy Dempsey asked who decides on the location of speed limits. He stated that the theory test should become part of the curriculum in Transition Year and should also be part of the civics programme. He believed that the theory part of the test would be more interesting to pupils than much of what was being taught at present. He also referred to the difficulty associated with people taking prescription drugs, such as cough mixtures, which would be liable to show up as alcohol. He suggested that such persons should be allowed to have a letter from their doctor authorising them to take the products. He referred to boy racers taking over fields in his constituency and he asked whether County Councils should put in facilities for go-carting, etc.
Assistant Commissioner Rock stated that the Gardaí could not target foreign drivers. They must enforce the law in general. It was possible to bring foreign drivers to court. The issue arises in relation to driving licences issued in another jurisdiction that may have a different standard of driving. There was also a difficulty in relation to penalty points being attached to a driving licence where it was a foreign one. However, the Gardaí were generally not entitled to demand the nationality of a person and many foreign people have acquired Irish nationality. The question of penalty points is being addressed in relation to Northern Ireland cars. Many foreign drivers encountered by the Gardaí do not speak English. On policing in rural areas, he stated that an increase in the numbers of Gardaí may give an opportunity to increase such policing in the future. He stated that any person being required to take drugs, such as cough mixtures with an alcoholic base, can carry a letter from their doctor.
Mr Brett referred to the revamped education programmes and he agreed with the involvement of young people in explaining road safety to other young people. The RSA was targeting foreign drivers. Leaflets were now being produced in eleven languages, particularly Polish. The RSA had been in touch with the Polish Embassy. Suspensions could take place even where penalty points could not be applied. The RSA would shortly distribute a video in relation to conduct on roundabouts. Speed limits were a reserve function of the local authorities. On the question of education in secondary schools, the Board of the Authority is interested and this will be part of the next Road Safety Strategy. The RSA is trying to target young men. They had sponsored road rallying and had discussions with Motor Sport Ireland. Their purpose was to get the message across to spectators at these events. Their slogan was to ‘keep race in place’.
The Chairman stated that he was proud, as Chairman of the Joint Committee, that the Joint Committee had recommended the introduction of random breath testing which had brought about a reduction in fatalities. He stated that he very much appreciated the cooperation of the Gardaí and the RSA. He said, ‘Together we can make the roads safer.’
Minister Cullen stated as follows:
‘Thank you Chairman for the opportunity to discuss motor insurance and road safety matters. I have noted the recommendations of the Joint Committee published in the Fourth Interim Report on Reforms to the Irish Insurance Market and Road Safety. I welcome all constructive suggestions which can lead to improved road safety and create a more robust motor insurance environment.’
‘There are now in excess of 2.1 million vehicles registered in this State. The cost of motor insurance is therefore a cost on virtually every household and every business in the country.
The committee will be aware that the insurance industry in Ireland operates within a free and open market and one in which, under EU law, I can have no direct responsibility for setting motor insurance premiums. The provision of insurance cover is based on actuarial or statistical data, together with other underwriting or commercial factors, such as driver details, nature of cover required and type and use of vehicles.
I am pleased that the Government’s Insurance Reform Programme, initiated in 2002, has resulted in cheaper and increased availability of motor insurance. Between April 2003 and October 2006 overall motor insurance premiums have fallen by 31.5 per cent according to figures supplied by CSO.
There are various factors contributing to this reduction. The introduction of the Personal Injuries Assessment Board was a major step, as was the Civil Liability and Courts Act, which includes penalties for giving false or misleading evidence in personal injury cases. In addition, random breath testing, increased resources to the Garda Traffic Corps and the roll-out of the penalty points system are expected to deliver better driver behaviour and reduced frequency of traffic accidents. These initiatives are having a positive effect on motor insurance premiums and I am confident that they will continue to do so.
I have noted the recommendation of the committee in relation to my Department procuring an ‘Event Data Recorder’ or ‘Black Box’ system. There is already a proposal by the European Commission in relation to a similar type system called eCall, i.e. a system that would provide an electronic notification to the emergency services in the event of a crash. I understand that the case for these types of systems is unproven at European level. There are no common technical specifications developed and no standard operating procedures in place. I understand that many of the larger Member States have not yet committed to the eCall proposal and are in the process of studying the proposal in more detail in order to inform their policy on this issue.
My Department, like our European counterparts, is also studying the eCall proposal. As part of this study we are also reviewing the American-style data recorder approach similar to that proposed by the committee. The analysis will assist in understanding the potential implications and benefits of eCall and data recorders for Ireland with regard to road safety, the means by which the system will operate and the costs and benefits arising.
The main purpose of the study is to inform the Department’s future approach in this area. It is clear though that any approach that is proposed would need to be consistent with and interoperable with developments at the wider EU level.
In the committee’s report, the point was raised as to whether insurance companies could make a greater contribution to road safety. Several of the committee’s recommendations are specifically directed towards insurance companies to take steps in relation to improved road safety. I am aware of the contribution which the Insurance Federation of Ireland and individual insurance companies have made to road safety over many years, particularly in relation to funding for road safety programmes.
I am sure that the insurance industry will examine the recommendations made by the committee in a positive manner and in a manner that contributes to road safety. It is in the interests of all of us, legislators, insurance industry and citizens alike to seize every opportunity to improve road safety.’
‘The Road Safety Strategy 2004–2006 set an ambitious primary target of a 25 per cent reduction in road collision fatalities by the end of 2006 over the average annual number of fatalities in the 1998–2003 period. Achievement of the target would result in no more than 300 deaths yearly by the end of 2006. The planning horizon for the strategy was limited to three years and the realisation of many of the key central policy initiatives was planned for delivery at the end of the three-year period.
While the target of 300 has not been achieved, there is a considerable improvement in the number of road deaths over the 1997 figure of 472. The reduction to 396 deaths in 2005 has taken place against the background of a very significant increase in the number of cars and drivers on our roads during that eight-year period.
In an environment where pedestrians, cyclists, cars, motorcycles and very large buses and goods vehicles are mixed together in competing for space on our road network, risk is inevitable. Acknowledging that risk, and acting to minimise the potential for tragic incidents, is the immediate responsibility of all road users, but particularly drivers.
However, reducing the general level of risk is the particular challenge of Government and those agencies tasked with the promotion of road safety and the enforcement and application of traffic laws.
One of the lessons that we have learnt in recent years regarding road safety is that the best approach is to adopt a coordinated one involving all of those who can contribute to safer road travel. Such an approach should be based on a targeted programme of initiatives directed at the main contributing factors to collisions. In fact, such approaches are the bedrock of road safety policies in the best-performing countries throughout the world.
In that context, the Government has sought to bring a collective focus to road safety initiatives that are directed to the achievement of specified targets. That strategic approach to road safety works. It is likely that if we had not adopted a strategic approach from 1998 we would have seen the maintenance of the level of fatalities that had been prevalent throughout the 1990s, when the average annual number of road deaths was 442.
Achieving measurable progress is better realised where challenges are set. With that in mind, the new Road Safety Authority has commenced work on developing a new Road Safety Strategy for the period post-2006 and is currently carrying out a public consultation process on this matter.
Substantial progress has been made on a number of key policy initiatives, particularly in the area of changing driver behaviour and drink driving. There has been investment in new, improved and safer roads. A new system of metric speed limits has been introduced and the penalty points system has been extended.
Legislation has been enacted and commenced on a number of key policy measures, including the provision enabling roadside Mandatory Alcohol Testing (MAT), a ban on the use of hand-held mobile phones while driving, and the legislative provision supporting the operation of privately operated speed cameras. Since the commencement of MAT by the Gardaí, the number of road deaths and collisions has fallen dramatically. The Gardaí have been successfully operating MAT checkpoints since July 2006, with over 30,000 drivers being tested at MAT checkpoints each month. The increased deterrent effect is reflected in the fall in the number of deaths and in the collision rates since August 2006.
The establishment of the dedicated Traffic Corps last year by the Minister for Justice, Equality and Law Reform, having a distinct management structure under the command of an Assistant Commissioner, addresses a particular commitment given by the Government. The Corps, when it is fully staffed, will provide the basis for the achievement of the significant gains in road safety that emanate from consistent high levels of traffic law enforcement. By the end of 2008, 1,200 Gardaí will be deployed to the Traffic Corps which will be over twice the number currently engaged in traffic duties.’
‘The new Road Safety Authority was formally established on 1 September 2006. The Authority is a single agency with responsibility for a wide range of functions, which have a bearing on road safety, including driver licensing and testing, road safety advertising and education, road safety research and data collection and the regulation of driver instruction.’
‘A High Level Group on Road Safety, with representatives from various Government Departments and Agencies, has been working for some time to promote full cooperation on cross-cutting issues and an integrated approach in the development of the Road Safety Strategy and the monitoring and implementation of that strategy. In a signal, however, that road safety is now at the very top of the political agenda, the Government has replaced the official’s High Level Group with a Ministerial Committee on Road Safety chaired by the Minister for Transport and including the Ministers for Justice Equality and Law Reform, Finance, Health and Children, Education and Science and the Attorney General.’
The Chairman stated as follows:
The Minister responded as follows:
On the backlog in driver testing, the Minister had recruited new testers and introduced overtime for driver testers, contracting in, and outsourcing. The delay in obtaining a licence had been reduced from 62 to 28 weeks. In the Budget, a significant sum was allocated to further reduce the backlog. The reduction of the backlog would facilitate the introduction of the new licensing system.
Mr Ned O’Keeffe, T.D., asked about the significant level of investment in roads. This could reduce road accidents because of the much lower accident rate on motorways and dual carriageways. He drew the Minister’s attention to the issue of ‘tail-gaiting’. There was not sufficient publicity in relation to this issue. Regarding roundabouts, these tended to be too narrow and caused difficulties for motorists and particularly for lorries. They seemed to be much more spacious in the UK. Deputy O’Keeffe referred to the Mitchelstown bypass and some difficulties there. On signage, he could not understand why the link to the Cork road from the Portlaoise bypass had not yet been completed. It was necessary to introduce many unmarked cars in order to detect inappropriate driving. This was the real answer. Greater surveillance was needed. The unmarked cars should have local registration numbers. On random breath testing, the over-exercise of this was frightening and annoying a lot of people. The major cause of drink driving was nightclubs and late-night drinking. The drink culture had to be dealt with. He believed that nightclubs are a major cause of car accidents in the ages 16–27. He also referred to the question of boy racers and said that the Gardaí and the Minister were doing an excellent job. He wondered if our car accident statistics were good enough to show the real causes of accidents.
Deputy Moynihan-Cronin stated that the Monday morning stories of deaths on the roads were frightening. She referred to the large numbers of uninsured drivers. A large number of drivers do not display insurance discs.
She found that there was a car being operated in Ennis in her name. She had made a statement to the Gardaí in relation to this and she asked why it was possible to insure and tax a car in her name without reference to her. She wondered if this was happening to other people.
The cost of insurance for young people, at €230 per month, seemed to be very high indeed. She asked the Minister why there had been no new entrants to the motor insurance business and if there had been, if this would have resulted in lower costs. She further asked if the driving test, as we know it, will continue. In Killarney the driving testers had no permanent office. On random breath testing she complained that the present ‘roadside test’ showed positive and negative results only. Persons were being taken to the station after a ‘positive’ result and then found not to be over the limit. There was a question as to whether that person’s driving record showed that they had been arrested for drink driving. This was unacceptable.
Deputy Callanan stated that great work had been done in relation to dual carriageways and the road network. The benefits were now being experienced in the West of Ireland. It was good that the Minister had obtained money to cut the waiting list for driver testing. The waiting period had been far too long. He further stated that it was necessary to go down the educational route and to teach driver training in every school. The new criteria for the provisional licence should involve some training. He said that a car could be a lethal weapon. He asked about non-nationals being uninsured, ‘Are they good enough to drive on our roads?’ In relation to online motor taxation, he believed that the motor tax registration process should include a check with insurance companies as to whether or not the presented insurance policy details were valid. On road engineering, he believed that a survey should be undertaken to establish the black spots, bridges, etc, on country roads. These had not been tackled and could be fatal. There was also a problem with hedge trimming, which was done up to a few years ago. The Minister should write to local authorities in relation to this issue.
Minister Cullen stated that the improved roads / motorways / dual carriageways would result in a lower accident rate. On driver behaviour, the issue was partly that of education and the training of drivers. He criticised persons who ‘sat’ in the outer lane, which is an overtaking lane. The observance of this in other countries was much better. Education on this issue and others would form part of the new driver licensing regime. The Minister had introduced an additional 35 penalty point offences. These included issues such as yellow boxes, roundabouts, etc. On roundabouts, he proposed to raise the question with the National Roads Authority and to get serious answers to the issue of the width of roundabouts. On the standards in relation to roundabouts, he expected that a lot of the design was undertaken by local authorities in conjunction with the NRA. A new signage programme was being put in place on all roads. He was not familiar with the issue of the Cork exit on the Portlaoise bypass. On unmarked cars, it seemed that a proportion of Gardaí cars should be unmarked. On random breath testing, this should have a significant impact. While the Gardaí wished to maintain public confidence in this system, it was clear that drivers should respect the law relating to drink driving. Drivers in other countries pooled their driving and arranged transport so that the driver did not drink. On boy racers, he had seen horrific video footage. However, he pointed out that there are many very good young drivers. A cohort, however, did not think that the law applied to them. On uninsured drivers, it was estimated that these were about 5 per cent. Unfortunately, foreign-registered cars were not required to display insurance discs. This issue would be raised with the EU. Many EU countries do not require the insurance disc to be displayed. On the issue of motor tax registration, a study was being undertaken to coordinate the data files of the insurance companies with the national vehicle registration file. The IT structure was being put in place. The driver testing system would change and international best practice in this area would be examined. On drink driving and arrests, he noted the points that were made. He was aware that the old system had given a reading, and that the new roadside test was simply indicative, the real test being the blood test. He would look at the question of ensuring that a person who was arrested, but then found not to be over the limit, would not have a record of the arrest on their file. Discussions were taking place with the Road Safety Authority and the Department of Education in relation to a programme in schools. Transition Year instruction would be an ideal start. Essentially, this was a matter for the Department of Education. It was, however, more fundamental than just for Transition Year.
The Ministerial Committee on Road Safety had already discussed this issue. In relation to non-nationals, there was a mutual recognition of driving licences in Europe.
Senator Leyden referred to the figure of 5 per cent uninsured drivers and noted that this was 100,000 persons. This was resulting in the loss of an enormous amount of cash. There were no reasons why cars should not be seized. If uninsured, they should not be on the road. There should be a month-long campaign in relation to imported cars and others. He was very disappointed by the continual campaign against the PIAB. He noted recent remarks made in the Dáil.
He stated that he had had similar difficulties to those experienced by Deputy Moynihan-Cronin. A person had used his address for car tax and insurance. There had been a number of parking fines issued to Senator Leyden’s address. On making enquiries, he was told that there was no legal measure to prevent someone from using another person’s address. The Licensing Authority had no right to object to the address being given.
He referred to the difficulties on the Mullingar to Dublin road where there were no toilets or services of any kind. It was a big area. Surely the NRA should have provided facilities on this and other roads. He was glad that the cameras would not be a cash cow. In relation to speeding and other similar offences, there should be an appeal system. If somebody was being taken to hospital, there might be a need for a car to speed. He complained strongly about the practice of selling cars, boats and caravans on the side of the road. There was a car sale on every corner throughout the country. Should this be banned? He wanted to have the rules of the road made available in many languages. He believed that this was not yet available. The driving instructors should be able to give instructions in the Polish language. He stated that the road signage was totally inadequate and that very little progress had been made in reducing speed. There was a need for better coordination between the Department of Transport and local authorities in relation to the setting of speed limits.
Deputy McHugh referred to the standard of the roads. The physical standard was one thing. There were persons driving at 30 miles per hour on national roads, which frustrated other drivers who were then speeding to make up for lost time. On projects for Galway, while there was progress, it was necessary to do more. There were difficulties in Tuam and Claregalway. A new N17 was the answer but there would be a revolution in Galway if people had to wait for this to solve the traffic difficulties. He was disappointed that the work on the western rail corridor would not commence for about five years. He referred to the much faster development of rail projects in the Dublin area and believed that the West was still being left behind.
Deputy Breen referred to the question of drugs among young people. What messages were being communicated to tackle drivers’ use of drugs? There was a need for a course for young people in schools. He also requested that there should be refresher courses for more mature people. For example, elderly persons were often frightened to drive on roundabouts. He was concerned about the new bypass at Ennis where there were crash barriers in the centre of the road. On-coming cars were very close to one another.
Deputy M. J. Nolan noted there were over 2 million vehicles on the road. It was necessary to ensure an adequate level of resources for the RSA, the NRA and similar bodies. He would like to see an increase in the Garda Traffic Corps and believed that there would be public support for such an increase.
On the driving test, a constituent had travelled to Dublin for the test to be told by the tester that the test could not go ahead because of frost on the road. This was an extraordinary situation. The whole purpose of the testing was to equip persons to drive in difficult conditions. This constituent had to wait for three months before he could take the test again.
The Minister stated that all vehicles, including foreign-owned vehicles, could be impounded. This had been made possible by recent legislation. Prior to that, only vehicles registered in the State could be impounded. He agreed that cars should be taken from persons who were not insured. He would look at the issue of the address at which cars were registered.
He believed that one of the most bizarre decisions by the NRA was not to have rest areas. The NRA had reversed this policy and a new policy was nearing completion and would be announced shortly.
On cars being sold on the side of the road, he would come down on this as hard as possible. It was not only cars, but bikes, boats and caravans. He questioned the quality of these cars. He noted that the motor industry had invested substantially in showroom facilities. He was working with his Department to deal with this issue. The Road Safety Authority had published the basic rules of the road in ten languages. A new draft of the rules of the road had been on display and would be adopted shortly. These would be translated into all relevant languages. However, the question of not understanding the language did not justify breaking the law in relation to the four main causes of fatalities:
Regardless of where a person came from, these were offences. There should be no excuse that the rules of the road had not been translated into the language of the person driving the car.
All cars, including foreign cars, were subject to the NCT test. The speed limit issue was one of the most frustrating that he had to deal with. He had vested power in relation to speed limits on non-national roads to local authorities. However, the local authorities were not doing what was required. Some councils had done so but the vast majority had not. He would re-emphasise this point again. He noted that other political parties controlled most of the local authorities and he asked them to intervene on this issue.
In relation to Galway and the western rail corridor, this was high on his priority list. The road between Galway and Shannon and the Ennis bypass were important issues. The Ennis bypass would be opened the following Monday. The level of investment by the Government in infrastructure was unprecedented anywhere else in Europe. Five motorways were being constructed and there were numerous rail projects being undertaken. On the western rail corridor, he had adopted the proposals to provide for this corridor. This would be delivered as soon as possible, but Irish Rail had to strike a balance between this and other priorities.
Unfortunately, it was not possible at this time to have a roadside test for drug testing. In Australia there was a saliva test, but this only applied to amphetamines and cannabis. A lot of the difficulty related to prescribed drugs. The Medical Bureau of Road Safety was attempting to find a way to do a roadside test. However, if a Garda suspected that a person was incapable of driving because of having taken drugs, he/she could take him/her to the Garda station and have a blood test taken.
Crash barriers, as a safety feature, were a modern approach. He was conscious of the difficulties for older drivers.
Persons with provisional licences for 20 and 30 years were making representations that they should not have to do the test. Some persons were very worried. They had never had an accident. Nevertheless, the purpose of the new regulations was to improve the standard of driving.
On the Traffic Corps, the increase in numbers was a high priority. At the end of 2006 there would be 800. He was trying to push the programme forward. It was clear that enforcement helped enormously. He pointed out that the Traffic Corps was not the only resource available for detecting road offences; all Gardaí could be involved.
Generally, on driver testing, he found the present testing procedure bizarre. In some countries it was necessary to pass the test during each of the four seasons, where there was snow, during daylight and at night, etc. The system currently in existence was in danger of being discredited.
The Chairman stated that:
Minister Cullen responded as follows:
Road Safety Programme – Context
The Society of Actuaries in Ireland estimated that:
The views of motorists, established in the recent Irish Insurance Federation (IIF) ‘Road Safety Survey’, are alarming:
Road accident fatalities reduced substantially in August 2006. This coincided with the introduction of random breath testing supported by a vigorous enforcement campaign. This is clear evidence that effective enforcement is central to compliance with good driving behaviours. Until consistent, effective enforcement is achieved and sustained, the full benefits of any road safety programme will not be realised. Allianz commends and fully supports all road safety initiatives.
Since 2000 Allianz has contributed €7.5m to the IIF’s Road Safety campaigns.
However, Allianz is gravely concerned at major shortcomings:
Responses by Allianz to the Joint Committee’s Recommendations on Road Safety
Q16:Insurance companies should cooperate with the establishment of an electronic data recorder (EDR) system so as to improve their knowledge of the reasons for road accidents and to enable them to compete more effectively for motor insurance business in the future.
A16:Provided there are no civil liberty reasons or other ethical reasons for not doing so, Allianz is willing to cooperate with this proposal where there is an acceptance of proven benefits.
Q17:Insurance companies should give a discount on premiums to policyholders who voluntarily install an EDR.
A17:Already the no-claims discount system rewards claims-free driving, and any steps a driver takes to remain claims free, contributes to earning a bonus. Allianz will consider discounts in the context of evidence of improved risk.
Q18:Insurance companies should not grant insurance cover to a person who has not received driving instruction from a qualified driving instructor.
A18:Any insurer, under current legislation, could not refuse to quote a proposer who holds a valid driving licence, whether or not he/she has had instruction from a qualified instructor.
Q19:Insurance companies should structure their offers of insurance for persons up to the age of 25 to strongly encourage young persons to drive safely and avoid accidents.
A19:Allianz fully supports better prices for those with safe driving records. Also, Equality Legislation forbids us from favouring one age cohort over another.
Q20:Insurance companies should provide, or arrange to provide, driving instruction and advanced driving instruction for persons from 17 to 25 in order for the young persons to obtain a reduction in the cost of insurance.
A20:This is a substantial issue and would increase the cost of insurance. A course of ten one-hour driving lessons will cost at least €300. With motor premiums at €500/€600, there is no scope to fund driving instruction.
Q21:Insurance companies should offer persons who have been found to be driving in excess of the blood alcohol limit a choice of fitting an alcohol detector or a loading of their premium.
A21:A premium penalty cannot be evaded, whereas an alcohol detector will be fixed to a vehicle and the driver can bypass the system, by swapping cars, for example.
Q22:Insurance companies should give allowances that would encourage safety features in motor vehicles.
A22:Safety features on vehicles are already built into insurance prices.
Clearly, road safety is now high on the Government’s agenda. The success of the random breath testing and the other measures that have been introduced over the past year is very satisfying indeed.
The Joint Committee made 29 recommendations in its July 2006 report. Of these, only a small number have been fully implemented. However, the period since the publication of the July report has been short.
The Joint Committee looks forward to the publication by the Road Safety Authority of the Road Safety Strategy for the years 2007–2009. The Joint Committee hopes that the strategy will seek to bring about a significant further reduction in the number of fatalities on Irish roads and that it will address all of the many issues that were included in the Joint Committee’s Report of July 2006.
The Joint Committee in reviewing its Recommendation 8 (The Road Safety Authority should publish a programme to improve the safety standard and safety features of all imported vehicles over a period of three years) has decided to make specific recommendations for action.
The Joint Committee recommends that:
59. All imported vehicles should have the following fitted by 31 December 2008:
The Safety, Health and Welfare at Work Act, 2005, was enacted in July 2005 and came into force on 1 September 2005. The Act imposed a maximum fine on indictment for breaches of the health and safety laws of €3 million plus a term of imprisonment of up to two years. Company directors and managers may be held liable where they are found to have contributed to any offence.
In general, the Joint Committee’s recommendations in this area have been adopted.
During the course of his presentation, Mr Beegan stated the following:
– the raising of the level of general awareness
– the targeting of future workers and managers with information programmes through the national education training systems
– making relevant information easily available to people with responsibility for managing workplace safety
– identifying and assessing high-risk areas
– enforcing the occupational safety and health code with targeted and regular inspections of businesses.
– Insurance companies should reward good workplace health and safety practices by means of a verifiable and robust system to be worked out with industry. The Authority will be pleased to play a role in this process.
– Voluntary recognition schemes also have a role to play in this regard, whereby companies pursue excellence in health and safety and are independently audited.
– Small companies must have health and safety statements in place and all companies must have named people responsible for health and safety. This could also be incentivised by the insurance industry.
– The insurance industry should provide greater support for the promotion of workplace health and safety.
Deputy Hogan asked the HSA about the level of fatalities. He stated that the statistics showed that not much progress was being made. He was critical of the Safe Pass programme. Non-qualified persons were being allowed on to building sites. This put everyone at risk. The HSA should take total responsibility for safety. He asked who was in charge.
Mr Beegan referred to the tragic increase in the number of fatal accidents in 2005. However, the overall trend was a drop of 25 per cent. The strategy being adopted would give better results. Construction was one of the worst areas. Where sites are well managed there was no difficulty. However, sub-contracting was over-represented in the fatality statistics. One of the issues in relation to public safety was the HSA’s parameters of responsibility. It was clear that another agency would not be established by Government. The HSA recently met with the Road Safety Authority to determine which agency was responsible in relation to accidents such as that on the Dublin Quays.
Mr Beegan referred to the difficulties with the Safe Pass. An independent review was being carried out. The HSA was aware of the difficulties relating to forged cards. Some of the recommendations being made would lead to a major strengthening of the regulations in relation to Safe Pass. FÁS had carried out an investigation. The HAS was not satisfied with the level of fatalities but the level of injuries had been steadily decreasing in relation to European comparisons and generally good progress was being made.
Deputy Quinn asked whether the HSA took insurance costs into account and how these could be reduced through the application of safety measures. When would insurance appear on the radar screen? Deputy Quinn stated that trade unions were attempting to highlight the level of accidents. He also asked if there was a case for a crime of corporate manslaughter. Were Polish workers being put at risk to a greater extent than Irish workers? How could this be addressed?
Mr Beegan stated that the insurance industry was a significant enabler, particularly in respect of micro-businesses. The HSA wanted to work with the insurance companies. He referred to Risk Assist, which was a programme of the Hibernian Insurance Company. The Health and Safety Authority wanted to encourage good business practices. The HSA wanted to see good businesses run safely and in this respect they would work together with the insurance companies.
Under the new arrangement with local authorities, all contractors would have to be able to demonstrate compliance with safety law. Similar provisions applied in relation to State companies, and there were discussions with the healthcare sector, which was a major employer.
In relation to foreign nationals, radio and TV advertisements were being used to get the message across. Pictograms were being used where there were language difficulties. A new European strategy was being developed. Undoubtedly, where workers did not speak English there was a difficulty. Responsibility had to rest with the employer.
On the question of corporate manslaughter, Mr Beegan stated that Section 80 was quite strong from a health and safety perspective. He believed that the current legislation was satisfactory. However, to reduce accidents a national change of attitude was needed. If we could sort out the smoking and plastic bags issues we could improve safety. Mr Beegan, in response to a question from Deputy Quinn, stated that the Attorney General had legal issues relating to the crime of corporate manslaughter.
The Chairman referred to small family businesses and asked if it was possible to require a Health and Safety Officer to be employed if there were more than 20 employees and also if it would be possible to require that a contract not be signed until a Safety Officer was in place.
Deputy Quinn asked if it was possible to make health and safety issues a requirement of planning permission in order to get the message across. There was a need to have a person in charge and for there to be accountability. Insurance companies had a role to play.
Deputy Callanan stated that he was concerned that the level of fatalities in the UK was one-quarter the rate in Ireland. He wondered what we are doing wrong. In relation to non-Irish workers, he asked if they were being put in more dangerous areas.
Mr Roe of the HSA stated that the HSA was undertaking research into non-Irish workers and whether they were being engaged in high-risk sectors. The rate of accidents in the new EU countries was twice the rate in the EU 15. There were many new workers without experience in industry. They were being run over by workplace vehicles. Language was a problem. In response to the question of the difference in the fatality rate compared with the UK, some reasons were advanced:
Mr Beegan stated that there was a pilot programme in 16 schools in the West of Ireland. The Chairman of the HSA had a particular interest in using the education system to communicate the message of safe working. Discussions were taking place with the National Council for Curriculum and Assessment (NCCA) regarding where in the educational system this message could be communicated.
Deputy Dempsey referred to the Leaving Certificate Applied Course and suggested that this would be a useful place to communicate a holistic concept of safety to young people. In relation to the pilot scheme, there should be an independent evaluation of this.
Ms Dorgan of the HSA stated that the most strategic initiative that the HSA could adopt would be to introduce health and safety on to the school curriculum. The HSA hoped to do this in partnership with the NCCA. The HSA would strongly welcome such a development. It was not possible for the HSA to educate young people in a piecemeal way.
Table: Fatalities at work
Economic sector |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
A – Agriculture, hunting and forestry |
16 |
25 |
14 |
20 |
13 |
18 |
18 |
B – Fishing |
7 |
2 |
3 |
0 |
3 |
2 |
2 |
C – Mining and quarrying |
3 |
5 |
3 |
1 |
0 |
6 |
2 |
D – Manufacturing |
11 |
3 |
7 |
7 |
3 |
7 |
4 |
E – Electricity / gas / water |
1 |
0 |
1 |
2 |
0 |
0 |
0 |
F – Construction |
17 |
22 |
21 |
20 |
16 |
23 |
12 |
G – Wholesale / retail trade; repair of goods |
2 |
1 |
1 |
4 |
4 |
8 |
3 |
H – Hotels and restaurants |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
I – Transport, storage and communication |
4 |
5 |
7 |
9 |
6 |
4 |
4 |
J – Financial intermediation |
0 |
0 |
0 |
0 |
1 |
0 |
0 |
K – Real estate, renting, business |
3 |
1 |
0 |
0 |
0 |
1 |
2 |
L – Public admin. / defence |
5 |
2 |
3 |
1 |
0 |
2 |
1 |
M – Education |
0 |
0 |
0 |
0 |
1 |
0 |
0 |
N – Health / social work |
0 |
1 |
0 |
0 |
1 |
0 |
1 |
O – Other community, social and personal services |
1 |
0 |
1 |
4 |
2 |
2 |
1 |
Total |
70 |
67 |
61 |
68 |
50 |
74 |
50 |
Note: The figures in this table represent the total number of fatalities (i.e. worker and non-worker).
The Department of Enterprise, Trade and Employment commissioned a Report on the Economic Impact of the Safety, Health and Welfare at Work Legislation. The report was prepared by Indecon Consultants. The report estimated that occupational injury and illness cost the Irish economy up to €3.6 billion or 2.5 per cent of national income.
The consultants conducted two surveys.
The findings of the Construction Industry Survey were as follows:
The consultants found that, on the whole, employers believed that the benefits of health and safety regulations equalled or outweighed the cost of compliance. The consultants found that, overall, the majority of firms believed that there had been a net benefit for their businesses arising from health and safety legislation. The legislation imposed a cost but it also brought substantial benefits in terms of a reduction in accident and insurance costs.
In general, the Joint Committee is satisfied that the Health and Safety Authority is working hard to bring about a reduction in the level of fatalities in the workplace. The Joint Committee congratulates the Health and Safety Authority on the work it is doing.
The Joint Committee notes that an official of the HSA stated that the most strategic initiative that could be taken in relation to health and safety is to have it taught as part of the school curriculum.
There is little doubt that a culture of safe working is needed. Ideally, this should be communicated through the school curriculum. It might be done as part of Transition Year studies, but because of the numbers leaving school before Transition Year, it should also be done at an earlier age, possibly at the start of second-level education. This programme should be combined with the road safety instruction programme.
As with road safety, safety at work cannot simply be taught in one year and then never again, but must become part of the curriculum, even if it is only for several hours’ teaching each term.
The Joint Committee also notes the proposals made by the HSA in relation to the involvement of insurance companies in health and safety.
It is clear that insurance companies should reward good workplace health and safety practices. In addition, insurance companies can play an important role in insisting upon good safety practices for small companies. The insurance company can also provide support in relation to the promotion of workplace health and safety. In addition, voluntary recognition schemes by a body such as the National Irish Safety Organisation will play an important role in encouraging companies to adopt and maintain safe work practices.
The Joint Committee also notes that the statistics for 2006 show that the major problem area for work safety relates to the agricultural sector. It is obviously very important that the safe working practice message is communicated to all persons involved in working on farms or in the agriculture sector generally.
In general, the HSA is to be congratulated on the reduction in the level of fatalities at work in 2006. However, it is essential that the level be further reduced to a level that is among the lowest per person working in any European countries. The HSA should consider what actions are required to bring about a further reduction in fatalities. On the basis of the information provided to the Joint Committee, the principal difference in the operation of our health and safety laws compared with the UK is that there is a significantly higher level of inspections in the UK.
The Joint Committee recommends that:
60. Insurance companies should:
The Joint Committee considers that the work of the Health and Safety Authority is of very considerable importance. It is essential that the numbers of fatalities and the numbers injured in workplaces in Ireland should be reduced to the lowest levels of all countries in Europe. If this is done, the burden of insurance costs for industry will be reduced and many injuries and fatalities will be avoided.
Workplace safety is a competitiveness issue for Irish industry.
The Joint Committee met with Hibernian, AXA and Quinn Direct on Wednesday, 17 May 2006.
NOTE: Statements and questions relating to road safety prior to July 2006 were dealt with in the Joint Committee Report on Road Safety of July 2006. These have been excluded from the reports of the meetings given below. Road Safety issues raised since July 2006 have been included in Chapter 2.
Mr Dick O’Driscoll, speaking for Hibernian Insurance, stated the following:
– |
Motor / Private: |
-12.6% |
– |
Commercial Motor (including fleet): |
-10.3% |
– |
Liability: |
-9.3% |
– |
Property: |
-4.2% |
– One of the advantages of the PIAB was that there was a reduction in spurious claims. The screening system for the PIAB was very effective and it had reduced spurious claims. This had not been thought of as a benefit at the time of the PIAB’s establishment.
– The second benefit was the control over costs. The fixed award system was bringing about an early settlement of awards.
– It was important to keep the PIAB legislation up to date and not to permit the reentry of strong legal practitioner involvement in the process.
– So far there have been no court cases arising from the non-acceptance of the PIAB awards.
Mr John O’Neill spoke on behalf of AXA and stated the following:
– It was still too early to make a final judgement on the success of the PIAB. The PIAB had played a part in helping insurers to reduce premium levels, mainly by permitting them to become more proactive at the early stages of the claim. The PIAB allowed a tightening up of the system.
– However, the volume of cases handled by the PIAB and the speed of awards both needed to be improved and there had also been a greater involvement of solicitors in the process than expected. The rejection rate on the PIAB awards had been increasing.
– The ultimate success of the system would depend on the level of review by the courts of rejected PIAB awards. If the courts made higher awards, then the lawyers would have won.
– In general, it would appear that many persons having accidents wanted legal advice. It was interesting that many awards were being rejected. In some cases all of the claimants associated with a particular firm of solicitors rejected their awards.
– distance marketing directive
– consumer protection code
– minimum competency requirements.
Mr Colin Morgan spoke on behalf of Quinn Direct. Among the points he made were the following:
Deputy Lynch referred to the level of uninsured drivers. She did not know this level and wondered how many were giving false insurance information.
Deputy Nolan stated that he was concerned about the effectiveness of the PIAB because of the number of claimants refusing awards and availing of court procedures. If the claimant was able to obtain increased awards in the courts, this would make the operation of the PIAB unsustainable.
Deputy Quinn expressed his strong concern about the effectiveness of PIAB. He wondered what the Joint Committee could do collectively to monitor the situation. It was important to ensure that the legal professions could not wreck the PIAB.
Deputy Dempsey asked whether profits had risen as premiums fell. As a former teacher, he was aware that in the Business Organisation course, insurance was covered as an issue. However, many students did not study Business Organisation. He asked if insurance companies could do more in respect of training at second-level.
Deputy Breen stated that profits seemed high compared with the UK. He noted that competition had been good for consumers in the banking sector. He wondered if additional insurance companies in the market would bring about lower premiums. He also asked if the hotline on fraud had been successful.
Deputy Callanan asked whether the problem was the lack of enforcement of existing laws. He also asked if Tracksure was viable.
Mr Dick O’Driscoll stated that Hibernian Insurance had a loading of 25 per cent for left-hand drive cars. In many cases, foreign drivers quoted host-country insurance. However, when there had been an accident it had been found that it was not possible to recoup the award from the insurance company in another Member State. In addition, because of a loophole in the law, Gardaí were unable to seize the vehicle of a foreign national. Eastern European drivers had learned that they had certain rights. However, in general, the statistical evidence of high numbers of left-hand vehicles involved in accidents was very weak. Overtaking in a left-hand drive car is very dangerous. Perhaps the Joint Committee would facilitate a reasonable approach on this issue. The Motor Insurance Bureau of Ireland may have information in relation to recouping the costs of accidents from insurers in other Member States.
On the PIAB, his concern was that, while the courts may accept the PIAB level of award, they would award legal costs against the insurance company. This would encourage other similar actions. There was a need to be alert in relation to this issue.
Mr O’Neill of AXA urged caution in relation to black box technology. Some recent accidents had occurred at relatively low speeds. Nevertheless, such technology had benefits. Reduced premiums would increase the number of boy racers. Essentially, reducing the premiums of young drivers brought about an increase in the number of young drivers and this, in turn, led to further road fatalities. AXA offered a no-claims discount of up to 70 per cent. It was a free market and AXA did not discriminate between left-hand drivers in deciding upon premiums.
The Chairman asked if it was possible to further reduce premiums by 15 per cent.
Mr O’Neill stated that there would not be profits from the insurance sector of €1 billion in 2007. He stated that the sector was reaching the end of the insurance cycle. AXA was breaking even on current business. As competition increased, AXA would lose money on underwriting. He stated that AXA was probably the first company to state that it was making a profit. It believed that it was the first company to recognise that ‘the game was over’. Prices would have to start rising again.
Mr O’Driscoll stated that it was necessary to start talking about profitability over the insurance cycle of five to ten years. While the market was attractive to new entrants on the basis of recent results, if these were reviewed on a five-year basis then a different picture would emerge. In 2005 Ireland’s returns were higher than in some other markets. But over five years they were lower. The market was highly competitive.
Deputy Quinn asked if the insurance sector was at the peak of this cycle. If insurance companies did not make profits there would be under-investment and premiums would rise again.
Mr O’Neill said that the market was never more competitive than at present. He stated that the problem of boy racers did not show up in the statistics. Most of these would be insured.
Mr Morgan stated that the UK market was a very attractive market. Quinn Direct was looking for a loading of 25–30 per cent for left-hand drive cars.
Senator O’Toole raised the issue of online tax registration. He understood that the insurance details given by those paying their motor tax online were not checked. He believed that a database should be established and the details given should be checked in real time. He asked whether the companies would cooperate.
In relation to the PIAB he stated that there was concern about the higher than expected rate of legal representation. The PIAB had spent the last two years in court. The ruling of the High Court in relation to solicitors was being appealed. In the past year there had been 20,000 cases. Of these, 3,000 had resulted in awards by the PIAB, 7,000 were referred to the courts and 9,000 were in process. On the speed of award, the question was whether it was taking longer than the time permitted by legislation.
The PIAB had to deal with vested interests. Some solicitors’ firms were rejecting all awards. There had been a recent challenge to the making available of medical information to the PIAB. In general, the PIAB had been far more successful than envisaged in the first Business Plan. He expected four to five more legal challenges over the next two to three years before the PIAB was fully established.
Deputy Quinn stated that Ireland, as a small open economy, was rapidly losing competitiveness in a number of areas. It was obvious that dark forces were looming in relation to insurance claims. The Committee had to be rigorous in ensuring that we did not go back to high legal costs in relation to personal liability insurance. While the carnage on roads was obviously of great concern, we also had to be concerned about the competitiveness of the economy and, in particular, the viability of small business. He wondered what could be done to monitor court cases.
He understood that a number of insurance companies would not enter the Irish market because the award levels in Irish courts were a lottery. He wondered if this was still the same. The question of the Book of Quantum had been around since 1992. It was disappointing that cases were still being challenged. This whole issue had much wider implications in relation to competitiveness.
Mr Morgan did not believe that the rejection rate of the PIAB awards would increase. Nevertheless, there was cause for concern. It appeared that many people were more comfortable getting legal advice in relation to an accident claim. The question was the level of costs if the issue went to litigation.
Mr O’Driscoll stated that some law firms were rejecting every case and that the legal profession was reverting to type.
Deputy Breen asked whether Mr O’Driscoll agreed with AXA’s view that it was the end of the road for insurance premium reductions.
Mr O’Driscoll reiterated that the rates were reasonable for the risks being undertaken. If further reductions were to be achieved, there would have to be an improvement in road safety. The great danger was that we would get to the point where the return on capital investment in other markets was more attractive and capital would flow from the Irish market to elsewhere.
On the question of the exchange of information with the Motor Registration Office, Hibernian Insurance would be fully supportive of the validation of insurance cover online. One of the great problems in Ireland was that all of the databases being maintained by the Motor Registration Office, the Gardaí, the courts, the insurance companies, did not talk to one another.
The Joint Committee met with FBD Insurance, the Financial Regulator, the Irish Business and Employers Confederation (IBEC) and the Society of the Irish Motor Industry (SIMI) (in relation to Road Safety) on Wednesday, 31 May 2006.
Among the points made by Mr Fitzsimons, Chief Executive of FBD Insurance, were the following:
Mr Tony Briscoe made the presentation on behalf of IBEC. Among the points made were the following:
The Chairman asked FBD if premiums could be reduced by a further 15 per cent in view of the profits of €1 billion made by the insurance industry in Ireland in 2005.
Mr Fitzsimons stated that the loss ratios being experienced justified the current premiums. Ultimately, competition would dictate the premiums. There would come a point of time where margins would be at the European level. It was very important that the Joint Committee and the Government focus on the cost base of the insurance industry.
Deputy Quinn referred to the political will manifest in the level of reforms that have been undertaken. However, this would only last as long as the industry showed falling premiums. He accepted that it was necessary to cut the cost base. In regard to legal costs it was necessary to have the assistance of the industry. There was anecdotal evidence that members would be forced into litigation against their will; more evidence was needed.
Senator O’Toole, as Vice-Chairman of the PIAB, said that he appreciated the points made by FBD. However, he was concerned that FBD’s actions might be undermining the PIAB.
Mr Higgins of FBD stated that FBD was not settling above PIAB levels. The case presented to court was often vastly different than that presented to the PIAB. The flaw was that if the original PIAB offer was accepted there should be no costs awarded. The PIAB had not reduced awards; it had simply reduced the costs of litigation. Where an award from the PIAB was rejected and then taken to court, solicitors were thought to be entitled to the costs up to the date of the making of the tender.
FBD was prepared to go into court. They warned about an emerging trend but there have been relatively few cases. The legislation needed to be strong enough. There was a major loophole at present. One of the difficulties with the courts was that reference could not be made to proceedings before the PIAB.
Senator O’Toole stated that this was a huge issue. The omission of the particular section of the Act that was complained of would have meant that the PIAB Bill would not have gone through. There was a constitutional case being taken in relation to medical records. Every single line of the PIAB Act was being tested so as to promote the involvement of the legal profession. On 31 May 2004 thousands of claims had been made before the court. These cases were ahead of recent cases and were still being dealt with.
Senator O’Toole stated that the PIAB was receiving 9,000 cases per year and by 2007 it would be dealing with 10,000 per year.
Mr Briscoe stated that he had been personally involved in lobbying for the PIAB for over ten years. It was inevitable that some would try to subvert the process. In the past, a major survey had shown that one in ten accidents had resulted in a claim. It was now easier to seek compensation. It was important that only genuine accidents, where no exaggeration of injury was being made, should be compensated. It appeared that claimants who rejected the PIAB award had nothing to lose by going to court. Some judges were taking the view that, where there was an injury, some compensation was justified even if the extent of the injury had been exaggerated.
Deputy Callanan complimented FBD and IBEC on the improved standard of safety at work. It was now evident that safety regulations were in place.
Deputy Breen asked whether more competition would bring prices down. He referred to a person being quoted €1,200 for car insurance and then being able to get cover for €790. He asked if we had reached the end of cheaper insurance. He was concerned that there were no penalties for the boy racers.
Mr Fitzsimons stated that there was intense competition in the market as shown by the recent Financial Regulator survey. Each company applied its own criteria when making offers of insurance.
In relation to cheaper insurance, he stated that if the PIAB continued to work and that if the Civil Liability and Courts Act worked as intended, there was still potential for cost reduction. FBD believed that it was efficient compared with some of its competitors. Mr Fitzsimons asked that the Joint Committee should reconvene after the next election. He was particularly concerned about non-national drivers. In response to a question he stated that FBD did not physically see the car it was insuring.
However, in relation to boy racers, FBD had offices throughout the country and they obtained information about policyholders who might be engaged in such activity.
Deputy Quinn asked about the cost factors relating to insurance and in particular legal costs. Where a legitimate legal claim was made, instead of awarding a lump sum, was there merit in providing an income over time? Would the disappearance of a lump sum be helpful; had this been discussed previously?
Mr Briscoe stated that, in certain cases, there were double benefits. There had been recommendations in the past in relation to staged payments and there might be a case for staged payments.
Mr Fitzsimons stated that the MIAB had recommended stage payments. There was a suggestion of some movement towards this in relation to large claims. However, it should be looked at to see if it was possible and viable. The calculation of a lump sum might prove to be either too large or too small, depending on the life span of the claimant. In certain jurisdictions, there was provision for stage payments.
Mr Higgins (FBD) stated that in the UK stage payments applied to serious injuries; these might not be cheaper.
Mr Brosnan (FR) stated that there was a substantial level of competition in the market. A total of 561 companies were entitled to write insurance in Ireland.
The Joint Committee met with Allianz Insurance Company on Wednesday, 10 October 2006. The Allianz presentation was made by Mr Brendan Murphy and Mr Sean Meagher.
During the course of the presentation, the following points were made:
Rate Changes by Line of Business (LOB) 2004–2006:
Line |
LOB |
2004 |
2005 |
2006 |
Commercial Lines |
Liability |
-17% |
-12% |
-15% |
Commercial Lines |
Motor |
-19% |
-8% |
-9% |
Commercial Lines |
Packages |
-10% |
-16% |
-7% |
Commercial Lines |
Property |
-16% |
-20% |
-18% |
Commercial Lines |
Total |
-17% |
-13% |
-13% |
Personal Lines |
Motor |
-20% |
-16% |
-1% |
Personal Lines |
Property |
-5% |
-13% |
4% |
Personal Lines |
Total |
-12% |
-14% |
1% |
Personal and Commercial Lines |
Total |
-13% |
-13% |
-4% |
Personal and Commercial Lines |
Total-cumulative |
-13% |
-25% |
-28% |
Exposure is Increasing
2000 |
2005 |
1.682m |
2.138m |
– building costs have risen substantially
– 80,000 new accommodation units per year
– significant commercial developments
Examples of Changes in Large Risk 2002–2005
Increase in Activity |
Change in Rate |
Premium |
|
Hotel |
+ 85.90% |
-62.3% |
-29.9% |
Contract Cleaning |
+ 84.15% |
-35.0% |
+20.0% |
Construction |
+103.99% |
-37.5% |
+27.5% |
Commercial |
+ 37.26% |
-40.4% |
-18.0% |
The Hotel Risk is a typical example of the dynamic at work. Turnover increased from €3.4m to €5.9m. This in turn involved extra accommodation, more functions, more employees and more patrons, i.e. a much increased risk.
A rebuilding cost sum insured at €200,000 in 2006 would have been €158,000 in 2003. This is an annual increase of 8 per cent or an underlying increase in exposure of 25 per cent in the period. When considering price reductions, this scale of uplift in insured value has to be taken into account.
Typical Example: €200,000 rebuild sum insured in Dublin:
Price reduction of €48, plus 25 per cent increase in cover (itself worth over €60).
Premium for a married male accountant aged 40 living in Dublin driving a 1.8L:
Premium for a single female nurse aged 25 living in Dublin driving a 1.2L:
Premium for a married female housewife aged 50 living in Cork driving a 1.0L:
Premium for a single male electrician aged 27 living in Dublin driving a 1.4L:
Premium for a single female teacher aged 30 living in Kilkenny driving a 1.4L:
Positive public attitude to anti-fraud must be supported and sustained.
– 72 per cent of employers had prepared a safety statement
– only 5 per cent were fully compliant
– just over 50 per cent of employers were broadly compliant, while 39 per cent showed some compliance and just 4 per cent limited compliance.
There is also a need for the HSA to maintain their proactive and progressive approach to the changing workplace. For example, it is notable that foreign national workers suffer a disproportionate number of fatal injuries.
Ireland |
2.9% |
G7 |
4.0% |
EU (15 Countries) |
3.3% |
UK |
3.6% |
New Zealand |
4.4% |
Source: Swiss re
– increase in road traffic accident numbers
– sharp rise in industrial fatalities in 2005
– steady rise throughout 2006 in reported fire losses.
Deputy McHugh’s understanding was that enforcement of the law was the primary action to be taken. He believed that this could lead to further reductions in insurance premiums. He asked about the application of the statute of limitations being suspended until the PIAB had cleared the case.
Mr Meagher stated that he had no difficulty with the suspension of the statute of limitations, but it did mean that the time scale for bringing cases to a conclusion was extended. It was important that the PIAB would do what it could to compress the time in which adjudications were made.
Mr Murphy, in relation to penalty points, stated that it was necessary to create a fear of enforcement. It was clear that there was a need for a significant and obvious enforcement of the motor vehicle regulations. The survey by the IIF showed that the public did not believe that the law was being enforced.
Senator Leyden noted that healthy profits were being made. He asked whether loyal customers should not get further reductions in their premiums. He was very pleased that the work of the Joint Committee had been acknowledged and that the work of the PIAB had been recognised. He asked if benefits could be achieved by the ‘Eye in the Sky’, particularly in relation to young drivers.
Mr Murphy stated that discounts were given as a no-claims bonus and that this encouraged safe driving. Allianz had only 8 per cent of the private motor insurance market, but a much larger percentage of the commercial motor market. Allianz had introduced its own training for commercial drivers. If the market as a whole adopted the ‘Eye in the Sky’, Allianz would also do so. Ideally, the data recorder for the ‘Eye in the Sky’ should be incorporated as cars are manufactured.
Deputy Callanan complimented Allianz on the price reductions that had been achieved. He asked about the issue of non-Irish drivers and about the non-enforcement of the law. On the black box, he asked whether Allianz was going to base its insurance cost on the miles travelled, particularly for 18–21-year-olds. He endorsed the view of Allianz that driver training should take place in schools.
Mr Meagher stated that, in general, the HSA was on top of the training. The safety materials were being given in other languages. It appeared that non-Irish workers had not really been trained in the work they were taking up, even if they were otherwise well educated. It was necessary for employers to ensure that they were fit for the work they were undertaking and that they had good screening practices in place. There was certainly a difficulty insofar as the driving test did not test for night-time driving, motorway driving or driving in adverse conditions.
Mr Murphy stated that the Allianz group was considering instituting pay-per-mile in other markets. However, given the small percentage of the Irish private market that Allianz had at present, it might not be appropriate in Ireland. However, he agreed that a data recorder system could potentially provide good control.
Deputy McHugh asked if the inadequacy of the driving test was due to the quality of testing or testers.
Mr Murphy stated that it was the conditions under which the test was taken, particularly in relation to night-time driving and motorway driving, which made it inadequate. The difficulty with many younger drivers was their lack of experience, in particular in relation to driving at speed. He believed that driving instruction should start in the classroom. During Transition Year life-saving training and other safety issues should be dealt with.
Deputy Brady asked about accidents among non-nationals. He asked if they had proper insurance. On the driving test, there was a problem insofar as a person undertaking the test might have to borrow a car and this was not acceptable to driving testers.
Mr Murphy stated there were close to 100,000 uninsured drivers and that this problem had been with us for a long time. Essentially the problem was about enforcement. Non-national cars were coming into the country on ferries where it might be possible to check their owners’ insurance. However, the insurance might only be applicable for a short time after the owners arrived from their own country. Allianz was concerned about left-hand drive cars.
Mr Meagher stated that lack of insurance cover was not only a problem in relation to non-Irish drivers; many Irish drivers were also uninsured.
Senator Coghlan stated that the cars should be checked at the port of entry and it should not be assumed that non-nationals were the only uninsured persons.
Senator Leyden asked whether the arrangements in relation to the PIAB had been generally satisfactory.
Mr Murphy stated that claimants were getting good and fair compensation.
Mr Meagher stated that only 25 per cent of Allianz cases forwarded to the PIAB had yet been decided on. He considered that the PIAB was quite successful.
Deputy Callanan referred to the loophole in the law insofar as car tax discs were being issued without a check on insurance.
Mr Murphy stated that this was the general question of having a national database. He would like to link the database in insurance companies to car tax and other information to provide a whole picture of the insurance and tax position of the car.
Deputy Brady referred to higher insurance premiums being imposed on 25-year-olds who wish to drive 1.8 or 2.0 litre cars.
Mr Meagher stated that there was a loading for younger drivers in relation to higher capacity cars. However, it was not Allianz’s policy to refuse to provide insurance outright.
Deputy Brady stated that it was very difficult for younger drivers with cars over 1.8 litres’ capacity to get insurance.
The Joint Committee asked PIBA for a written submission. PIBA’s views on changes in premium prices by category (Private Motor, Commercial Motor, Commercial Liability, and Commercial Property) since April 2005 were received at the end of October 2006.
The premium rates for Private Motor are beginning to stabilise after reductions over the last few years. Motor premiums for young drivers have dropped in particular. This would appear to be as a result of competition from Quinn Direct initially, and followed by reductions in rates from Asgard Underwriting, which has distributed their product through a relatively small number of brokers. Overall rates for drivers under 25, particularly with higher cc. cars, have become very competitive.
One criticism that could be made is that these products should be openly available to the broker market. Insurers should not be allowed to enter the broker market unless they enter it properly. Limited distribution of products has no logical commercial purpose, distorts competition and is not in the interests of consumers. Consumers deserve and expect to be afforded proper choice of products when consulting a broker. Competition in the broker market should be encouraged.
It has been pointed out that insurance is still quoted in the media as being a reason for inflationary pressure, along with wages, energy, etc. These assertions are normally left unchallenged, although premiums have been in virtual freefall for the last two years. The same can be said of Commercial Motor, Commercial Liability and Commercial Property. These should not be accepted from businesses as reasons for increasing prices.
Commercial Motor rates are falling in real terms and currently a number of smaller niche players have set up schemes. Business Insurance is extremely competitive and brokers have played a large part in achieving this competitiveness. Unlike Personal Lines Insurance, Commercial Lines Insurance requires a level of expertise which brokers provide.
Commercial Liability is extremely competitive. Rates are falling in general over the last three to four years, and renewals for 2006 in some cases are falling further but are at least not increasing on 2005 levels. This is due to competition between the main insurers and the entry of Quinn Direct into the broker market. Again, increasing insurance costs are likely to be caused by business expansion as Liability Insurance is calculated on payroll and/or turnover. Generally, larger corporate risks also can get reductions, however, they are mainly achieved by presenting an alternative, competing premium. The role of brokers is significant here, and again the importance of brokers needs to be acknowledged in increasing competition.
Commercial Property: There is competition between the dominant insurers. Royal and Sun Alliance and Eagle Star are presently very aggressive and are slashing rates to achieve an increase in market share. Rate reductions of 40 per cent upwards are not unusual, even on rates already reduced in 2005, if a competing quote is received. Quinn Direct and the smaller players are hugely instrumental in bringing competition into this market. Mergers and acquisitions, such as Royal and Sun Alliance’s recent acquisition of Europa General Insurance are not good for the market. The market has not enough players, and many brokers are not being given agencies by some of the new entrants.
We believe that intense competition in the marketplace has continued to exert downward pressure on motor and commercial liability insurances.
Our members report that:
On 20 December 2006 the Financial Regulator published its Private Motor Insurance Statistics for 2004. The primary objective of the report was to examine the level of accident frequency and costs, and their impact on premiums paid by different categories of drivers. This is the third such report and is based on policy, premium and claims data for 2004, submitted by the Irish Insurance Federation (IIF) to the Financial Regulator.
The report shows that:
The report also details the development pattern of claim costs. For example, it shows that by the end of 2000, just 41 per cent of total claims costs for comprehensive policies had been settled for accidents that occurred that year. However, by the end of 2004, the industry had settled 87 per cent of total claim costs for 2000. This trend, whereby it takes a number of years for settlement of some claims, is reflected for all accident years in the report. It is expected that the 2005 statistics will show a change in this trend, with a larger percentage of costs being settled earlier due to the introduction of the Personal Injuries Assessment Board (PIAB) in 2004.
Copies of the Motor Insurance Statistics 2004 are available from the Financial Regulator’s website at www.financialregulator.ie.
The Joint Committee is pleased with the level of cooperation it has received from insurance companies. It is clear that insurance premiums have fallen substantially since the Joint Committee commenced its work. At the same time as this reduction in premiums has taken place, the insurance companies have been achieving record profits.
Based on the evidence received from users and from brokers as well as from insurance companies, it appears that insurance premiums are continuing to fall and that the market is relatively competitive at the present time. The Joint Committee is disappointed that there were no significant new entrants to the market. However, on the other hand, the growth of Quinn Direct and FBD has been significant and they have increased competition in the market.
The Joint Committee considers that insurance companies, while they are making a very significant contribution to road safety, can make a further contribution in different ways. These points are addressed in the chapter on road safety.
Ultimately, the market will determine the level of insurance premiums. However, the market will be greatly influenced by costs and the regulation of the market.
The reforms that have been brought about through the commencement of the Personal Injuries Assessment Board and the Civil Liability in Courts Act, as well as many other reforms that have taken place, have enabled insurance companies to make profits while premiums have been falling. The Joint Committee hopes that the Government will continue to pursue a programme of reform of the market, following the publication of this report, and that the market will continue to change and develop over the next five years.
The PIAB Act was passed by the Oireachtas in December 2003. The Act provided for the setting up and operation of the Personal Injuries Assessment Board (PIAB) to consider personal injury cases.
The PIAB came into operation on 1 June 2004. The Book of Quantum, which contains general guidelines as to the amounts that may be awarded or assessed in respect of specified types of injury, was subsequently published on the Board’s website. PIAB’s main objective is to reduce the cost of delivering compensation to genuine claimants while reducing the cost of insurance for consumers and business alike.
The PIAB has the following features:
one from the Irish Business and Employers Confederation (IBEC) and one from the Irish Insurance Federation. The Director of Consumer Affairs and the Consumer Director of the Irish Financial Service Regulatory Authority shall also be members.
The Joint Committee asked the insurance companies to give their views on the PIAB. These were included in the submissions made by insurance companies and are shown in Chapter 4.
The Joint Committee met with Ms Dorothea Dowling, Chairperson, PIAB, and Ms Patricia Byron, Chief Executive, PIAB, on 18 October 2006. Their submissions were as follows:
In her presentation, Ms Byron, Chief Executive, PIAB, spoke of the Board’s mission, its objectives and the development of a new model and process. Ms Byron stated that the vast majority of claims were being settled quickly, that the PIAB facilitated the settlement of claims and that there was now only a small volume going to the court system.
At the establishment of PIAB, 90% of cases went to litigation. The objective of PIAB was to reduce this to 20%.
The top three deliverables were:
The Chairman stated that the Joint Committee would have to contact insurers directly to request that the statistics be made available to the PIAB on the cases that were resolved prior to a PIAB award.
Ms Dowling stated that the Financial Regulator could obtain the information as part of the statutory returns.
The Chairman stated that 90 per cent of the population did not know of the existence of the PIAB as they only made a claim perhaps once in their lifetime.
Ms Dowling said that they wished to directly inform people with claims. They have been holding off from doing so out of respect for the courts, pending the decision by the Supreme Court.
Deputy Hogan congratulated the PIAB. He was particularly interested in Ms Dowling’s comments about a 50 per cent further reduction in insurance costs. He noted that the profits of insurance companies had increased. It was a tremendous good-news story.
Ms Byron stated that it had been necessary to go slowly and to delay publicity until the processes were all working well.
Ms Dowling stated that the 2005 Blue Book Report showed that companies were settling 75 to 77 per cent of claims very speedily. The estimate of outstanding liabilities was not consistent with the cost of claims being settled. Most of the profits being reported were the release of reserves from previous years. She was concerned that the failure to apply penalties for exaggerated claims would result in an increase in such claims.
Deputy Ruairí Quinn congratulated the PIAB. He referred to discussions that were taking place in relation to a Book of Quantum in 1992, which the industry had then resisted. He noted that the battle had not yet been won. He asked about the prospect of a 50 per cent reduction in the cost of insurance. He was concerned about the six firms that were not cooperating with the PIAB. He asked if this had been brought to the attention of the Law Society. On the request for data from insurance companies, he noted that there might be issues of confidentiality and competitive advantage. It should be possible to achieve a method of reporting while maintaining confidentiality.
Ms Dowling stated that they had asked for a meeting with the Law Society. The PIAB was concerned about particular firms. The data from insurance companies could be obtained through the Financial Regulator and given anonymously to the PIAB.
Ms Byron stated that they had talked to the Law Society. Their difficulty was only with six firms. On the data from insurance companies, the PIAB had talked to the IIF.
The Chairman stated that the Joint Committee would write to the insurance companies and endeavour to get the information.
Deputy Joe Callanan congratulated the PIAB on its success. He also expressed interest in the further reduction of insurance costs. There was a huge cost in servicing by the legal profession. The message would have to be communicated that the PIAB could do the job effectively. He asked if a solicitor were to make an application in relation to the McMenamin judgement, would the PIAB be prevented from communicating directly. He also referred to fraudulent claims.
Ms Byron stated that under the Civil Liability and Courts Act, if a claim was exaggerated the entire claim was invalid.
Ms Byron stated that Minister Martin was going to the UK in early November to encourage insurance companies from the UK to enter the Irish market.
Senator Joe O’Toole (Vice-Chairman of the PIAB) stated it was very encouraging to get the support of the Joint Committee. Every single Board Meeting of the PIAB dealt with three or four difficult issues. The work of the PIAB was being watched all the time by the legal firms. There were many vested interests in the process. However, most of the legal profession had identified with the PIAB and had no problem with it.
Senator O’Toole also referred to the visit to London by Minister Micheál Martin, T.D., to explain how the PIAB works and the benefits of the PIAB to insurers. The PIAB could only perform its function fully when the Supreme Court had made its judgement on the Judge McMenamin decision. Senator O’Toole stated that the PIAB was concerned about what happened in the cases that were resolved without a PIAB award being made. Essentially, the PIAB was not obtaining any benefit from its work in relation to these cases and it did not have information on the level of settlements being made.
Ms Dowling stated that a lot of good things had happened. The IBEC Voluntary Code referred to treating the claimant as a patient. The improved level of road safety would also reduce the number of claims. The PIAB was working on the basis that it would process 10 to 15 per cent less claims in relation to road safety accidents in 2007. Ms Dowling referred to the importance of the data from insurance companies.
The Chairman stated that in 2008 there would be 1,200 Gardaí in the Traffic Corps and that this should bring about a reduction in fatalities as well as reduced crime generally. In addition, he welcomed the recent announcement about the installation of 600 cameras throughout the country.
Senator O’Toole stated that the success of the PIAB could not have been achieved without the work of many persons. In particular, the social partners, ICTU and IBEC have been helpful. If the parties had not agreed to come together, then the PIAB would not have happened. Everyone had to make a leap of faith.
The Chairman stated that in 2004 the Taoiseach had made insurance the Government’s number one priority. This had informed everyone that the Government was serious about dealing with excessive insurance costs.
Deputy Quinn asked if the PIAB had the power to charge for sending its initial notification. He believed that the PIAB’s success should be communicated through trade union journals. There should be more publicity about the benefits of the PIAB to claimants.
Following the meeting with PIAB, the letter below was sent o the principal insurance companies.
The Joint Committee has been informed by the Personal Injuries Assessment Board (PIAB) that the Board has requested certain information from insurance companies that has not yet been provided to it.
As you are aware, the Joint Committee is very supportive of PIAB and is very pleased with the impact it has made on reducing the costs of personal injury claims in Ireland.
In order for PIAB to track the outcomes of all personal injury claims in the country, the Joint Committee would like your company to provide the requested information to PIAB.
The Joint Committee understands from PIAB that:
PIAB needs aggregated information in relation to all settlements made by insurance companies as outlined above.
PIAB does not need to know the identities of the persons or the levels of awards in individual cases, but it does need to have information in aggregate on the numbers of settlements, time period when settlement took place, and whether or not fees to legal advisors have been paid and similar information.
The point was made to the Joint Committee that while PIAB has been successful so far, it will be necessary to be vigilant for several years to ensure that its success is sustained. If PIAB can obtain the information from insurance companies that it is requesting this will assist PIAB in the future by allowing full tracking of all personal injury claims in Ireland which will support PIAB in continuing with its successful model.
We look forward to your response to this request of the Joint Committee.
In general, the response from insurance companies was positive. Most of them agreed that information would be provided on claims notified to the PIAB but settled directly by companies and also on the outcome of cases settled in the courts where the PIAB assessment was rejected. The response to the PIAB by the Irish Insurance Federation on behalf of insurance companies is given below:
I have now consulted with members on the templates we discussed in August. IIF’s position is that most members* are happy to supply the following data to the PIAB at this time as long as the PIAB can identify the claims in question:
Members are prepared to supply aggregate returns directly to the PIAB showing the ‘Number of Cases’, ‘Total Settlements’ and ‘Total Costs Paid’ as long as the PIAB can forward lists of such cases with the appropriate claims reference.
On receipt of details of the claims from the PIAB, members will complete the forms (i.e. Table 2) and return them to the IIF secretariat. We will then pass on market aggregate figures for the columns ‘General Damages’, ‘Special Damages’ and ‘Costs’ in respect of awards and settlements to the PIAB.
The data will be supplied on a one-off basis as we do not wish to enter into an open-end commitment to supply data indefinitely. Please also note that we will supply the data on the understanding that the confidentiality of individual companies’ data will be respected, that the data will only be used by the PIAB to inform itself and that any other use of the data will be cleared with the IIF in advance. We look forward to the PIAB’s agreement to these terms. We also look forward to hearing from the PIAB in relation to the collation of data so that work can begin.
* The following members representing approximately 87 per cent of the relevant IIF market in 2005 GWP terms are happy to supply the above data: AIG, Allianz, AXA, Eagle Star, Ecclesiastical, FBD, Hibernian, Irish Public Bodies, Royal & Sun Alliance, St Paul Travellers.
Quinn Direct responded on 14 November as follows:
Firstly, I would like to state that Quinn Direct fully supports all Government initiatives that reduce the cost of claims and insurance premiums. PIAB is a key part of the Government’s strategy in this area and we have fully supported PIAB since it has been established.
To date we have a number of concerns with the performance of PIAB in terms of the rate of rejections of awards, the level of awards being made and the lack of transparency in relation to some of their key operational statistics. We have made PIAB aware of these concerns but we have not received a satisfactory reply to date.
We note from your letter and from other correspondence between PIAB and the Irish Insurance Federation (IIF) that PIAB are requesting detailed information from insurers in relation to injury claims that are not settled by PIAB. We do not believe that PIAB are entitled to details of the injury claims we have settled outside of the PIAB process. Furthermore, we do not see how providing this information to PIAB would benefit Quinn Direct or our policyholders in terms of reducing claims costs and therefore we believe we should not provide this confidential and commercially sensitive information to PIAB. We believe that PIAB should have sufficient data on injury claims from the awards it makes and should use this data to improve its operations.
The Joint Committee continues to be very concerned with the McMenamin judgement referred to above. The PIAB is awaiting a decision from the Supreme Court in the case. If the Supreme Court decision does not find in favour of the PIAB, it will be necessary to introduce legislation to permit the PIAB to communicate directly with claimants even where the claimant has engaged a solicitor. As the delay in hearing the case by the Supreme Court is having an adverse effect on PIAB, the Government should now introduce amending legislation to make it possible for PIAB to deal directly with claimants and for PIAB to be able to advertise that solicitors are not needed for a claim to be made to PIAB.
Some of the information being requested by the PIAB is for statistical purposes and will enable the PIAB to understand developments in the risk insurance market. It may be that the Financial Regulator should obtain this aggregate information for the PIAB and for the industry.
One issue that may be of concern for the future viability of the PIAB is the number of claims that (a) are resolved by insurers following notification of the claim to the PIAB and where no PIAB assessment is required (either at the outset or within the 90-day period) and that (b) are disputed and then released by the PIAB; some of these cases are then settled by insurance companies. The PIAB has no information for such cases.
The PIAB should be rewarded on an appropriate basis for all of the costs it incurs.
The Joint Committee is very pleased with the success of the PIAB to date. This success has been hard-earned. Some of the benefits could be lost if the PIAB cannot deal directly with claimants and advertise that it is not necessary to engage a solicitor to make a claim. Of course, where the claimant clearly wishes to have a solicitor act on his/her behalf, the claimant must have the right to such representation.
The Joint Committee recommends that:
The enactment of the Civil Liability and Courts Act, 2004, was an important reform. The full impact of the Act has yet to be determined but all of those who gave evidence to the Joint Committee spoke favourably of the impact it has been having.
The Joint Committee has addressed many recommendations to the Department of Justice.
Recommendation No. 31 In-house barristers should have a right to appear in court in defence of claims against the insurance companies that employ them.
Response from the Department:
The final report of the Competition Authority, on competition for legal services, has yet to be published.
Since the receipt of this response, the Competition Authority published its final report on the legal professions in December 2006 and made the following recommendation:
Barristers in employment should be allowed to represent their employer in court. The current restriction preventing this forces businesses and organisations to engage the services of an outside barrister, through a solicitor, and reduces the supply of available barristers. It is also at odds with the fact that solicitors can represent their employers in court. Removing the restriction will promote competition between barristers.
The Joint Committee urges the Minister to implement this recommendation which it believes will reduce costs for insurance companies.
Recommendation No. 7 The Government should establish an expert group that would consider the information now published by the PIAB on the levels of awards in the Irish courts, the levels of UK awards and the levels of awards in other jurisdictions. This group would recommend a level of awards that would be appropriate to Ireland. The recommendations of the group should be published in draft form to allow all interested parties, including representatives of victims, to make submissions on the proposals.
The Joint Committee received the following response from the Minister for Justice, Equality and Law Reform, on 31 August 2006, to whom the recommendation was referred by the Minister for Enterprise, Trade and Employment:
I am directed by the Minister for Justice, Equality and Law Reform to refer to your letter of 17 July on behalf of the Joint Committee regarding its proposal for a guide (a Book of Quantum) based on personal injury awards in Irish courts, the UK, and other jurisdictions. Your letter was by way of response to the views of the Minister as stated in his letter of 30 June 2006.
Government policy to reduce the level of personal injury awards has been multi-faceted, consisting of (a) the setting up of a Personal Injuries Assessment Board to address situations where liability is not an issue; (b) introducing new court proceedings for personal injury actions, and new penalties for fraudulent and exaggerated claims, in the Civil Liability and Courts Act 2004; and (c) establishment of the Legal Costs Working Group which was set up by the Minister in September 2004. Significant curbs on advertising by solicitors that helped to promote the concept of a compensation culture are in operation under the Solicitors (Amendment) Act 2002.
The Civil and Liability and Courts Act of 2004 has reduced the time taken and the costs involved in personal injury actions. Under the Act, the claim of a plaintiff who gives false evidence will be dismissed by the court and persons convicted of the offence of giving false evidence are liable for heavy fines and imprisonment for up to 10 years. These provisions marked a significant watershed in the efforts to deter those unscrupulous individuals who embark on legal actions on a fraudulent or exaggerated basis to enrich themselves at the expense of the wider community. The measures contained in the Act of 2004 are now helping greatly to alleviate the insurance burden on customers and business and the cost to public authorities of personal injury actions.
The early performance to date of the Personal Injuries Assessment Board is impressive. The PIAB reports that the estimated savings in legal costs attributable to its work to June 2006 are in the region of €13,100,000. Assessments have been delivered approximately three times faster and at a delivery charge four times cheaper than through the litigation process. This is very significant considering that in 2004, when an estimated €965 million was paid out in compensation to personal injury victims, litigation costs of an estimated €444 million were incurred in the delivery of this compensation to the victims. As well as being a major benefit to victims of accidents this is a significant reduction in the cost of delivery of compensation.
While the full effect of Government strategy will become apparent over time, there has to date been a significant reduction in premiums to policyholders, particularly in the area of motor premiums which the Insurance Federation of Ireland reports have fallen by an average of 45 per cent between 2003 and 2006. This indicates that Government policy is working.
The Legal Costs Working Group finalised their report late last year and the Government endorsed the report’s recommendations. The Minister has taken the necessary steps to implement the recommendations. Currently the Legal Costs Implementation Advisory Group, under the chairmanship of Desmond Miller, is working on this task and is due to report in the autumn of this year.
The Minister is, of course, keeping the impact of recently enacted Government policies under review. The Minister, however, remains of the view that the Book of Quantum proposed by your Committee, based on international comparisons, would have no particular validity in Irish courts. A comparative analysis of such awards may well be of interest, having due regard to the differences in the various jurisdictions – legal, social and economic – but the application of similar awards to individual cases in our courts would likely fall short of the necessary principles required to defend and vindicate the rights of persons. In any event the concept of a Book of Quantum in Irish law is still in its early stages of operation and the Minister believes it should be given proper time to develop.
The Joint Committee is grateful for the full explanation given by the Minister’s Private Secretary. The Joint Committee, nevertheless, is of the view that an inquiry of the type it recommended is necessary. However, the Joint Committee accepts that the effects of the establishment of the PIAB and the existence of a Book of Quantum have yet to be worked through the courts and legal system and that it might be prudent to defer such an inquiry. However, the desirability of holding an inquiry should be reviewed annually. In the overall context of reducing insurance costs, Recommendation 7 is important.
The legal reforms introduced in response to the difficulties in the insurance market have been far-reaching and will continue to benefit the industry and society in the future. However, the full impact of the Civil Liability and Courts Act has yet to be realised. As with the PIAB, vigilance is necessary to ensure that the Act achieves the anticipated benefits.
The Financial Regulator has a wide range of responsibilities for areas such as banking, credit unions, building societies, as well as the insurance industry. In publishing its Third Report, the Joint Committee concluded its chapter on insurance regulation as follows:
The Joint Committee again welcomes the very considerable progress being made by the Financial Regulator. While the Joint Committee is pleased to note that some of its recommendations have been accepted by the Financial Regulator and others have been considered, the Joint Committee urges the Financial Regulator to address all of the issues in relation to the insurance market so that the regulation of the market is reformed as soon as possible in the interests of consumers and of business purchasers of insurance cover. The Joint Committee looks forward to reviewing the changes in insurance regulations made by the Financial Regulator in the course of its next review of the insurance market.
The Joint Committee exchanged correspondence with the Financial Regulator on its recommendations in 2006. The correspondence referred to specific recommendations of the Joint Committee. The views expressed in each letter are given later in this chapter under each recommendation to facilitate understanding of the points at issue.
I refer to the publication of the Committee’s Third Interim Report on Reforms to the Irish Insurance Market. The Financial Regulator welcomes the work of the Committee in relation to issues in the insurance market and, where possible and appropriate, is positively disposed towards the recommendations made by the Committee.
The Committee will already be aware that the Financial Regulator has acted upon a number of the recommendations addressed to it and I note that it has categorised recommendations 19, 23, 35 and 50 as implemented.
This letter addresses the comments made by the Committee in its Report in relation to the other recommendations addressed to the Financial Regulator. I am happy to report continuing progress in relation to the implementation of most of the outstanding recommendations. As you will see, in a number of cases we believe that recommendations are either for other parties in the first instance or, for reasons given, we believe that implementation of the recommendation should not proceed.
Summary of the presentation:
The Chairman, Mr Donie Cassidy, T.D., asked Mr Neary (a) whether the study of the insurance broker market could be commenced within the next six months, (b) in relation to the two recommendations that were not within the power of the FR to implement, if the FR could not see it as its responsibility to make these recommendations to the Ministers, and (c) whether production quotas for brokers encouraged bad advice.
Mr Neary stated that the study of the insurance broker market would commence at the end of six months. The FR would be happy to assist the Joint Committee in making representations to the Ministers in relation to the two recommendations that were not within the power of the FR to implement. In relation to production quotas, this was no excuse for giving bad advice and those who gave bad advice were responsible, whether or not there was a production quota.
I refer to your letter of 19 May 2006 and to the presentation you made on Wednesday 31 May 2006 to the Joint Committee on Enterprise and Small Business.
The Joint Committee appreciates the information you provided in your letter to us and the very constructive approach adopted by you in your presentation on 31 May 2006.
The Joint Committee acknowledges that the Office of the Financial Regulator has made very considerable progress in implementing the recommendations of the Joint Committee in relation to insurance reform.
As you state in your presentation of 31 May 2006, you have been able to act on all of the Joint Committee recommendations with the exception of three.
We note that you offered to work with the Joint Committee to assist it to implement its remaining three recommendations to the Financial Regulator.
Thank you for your letter of 17 July 2006.
The Financial Regulator notes and appreciates the Joint Committee’s acknowledgement of the progress that has been made towards implementing the recommendations addressed to it.
At present the decision on whether to settle or contest a claim rests solely with the insurer. This is generally provided for in the terms and conditions of the insurance contract.
We reiterate our opinion, formed on foot of legal advice, that a legislative amendment to the discretion of insurance companies to enter contracts is necessary to give effect to the Committee’s recommendation, and that the recommendation could not be given effect by a Code of Conduct.
The Financial Regulator cannot therefore implement this recommendation. The Committee may wish to address this recommendation to the Department of Finance instead.
We do not wish to radically change the basis of insurance as might be implied by the bringing in of new legislation. We can modify this recommendation to a request for a code of best practice for insurance companies that would mean that, where a policyholder objected to a settlement of a claim by an insurer, the insurer should not be able to settle the claim until an arbitrator is appointed. Kindly let us know if it would be possible to implement this modified recommendation.
The adoption of a voluntary code would have the benefit of potentially avoiding the legal issues, previously identified, associated with a statutory code. Should the Joint Committee be minded to propose a voluntary code, we would suggest that the issue be addressed to the Irish Insurance Federation in the first instance.
The views expressed here bring up a fundamental point that the Government needs to address. This is the issue of responsibility within Government for the insurance sector. This issue is dealt with in Chapter 9.
Essentially, a Minister needs to take responsibility for implementing this recommendation. Alternatively, IBEC and the Insurance Industry Federation might reach agreement to implement this recommendation on a voluntary basis without the need for Government intervention.
The Financial Regulator’s role includes helping consumers to make informed decisions on their financial affairs in a safe and fair market. We are therefore well disposed to suggestions that aim to bring greater transparency to financial services for consumers.
It may, however, be more relevant to focus on the costs, in terms of increases in premiums that accidents attract rather than trying to illustrate the benefits of being accident-free. The financial benefit from being accident-free accrues from not attracting the loading factors that arise from claims. A claims-free policyholder without any loading will retain the same risk profile, will qualify for a similar premium from year-to-year and will not notice the benefits of being claim-free.
(One notable exception is in the area of motor insurance where an accident-free period may indicate improved competence, and where there is a proven correlation between driver age and risk. Insurance companies have responded to this by implementing no-claims bonus schemes.)
Following on from this it is perhaps more meaningful to try to ensure that consumers understand the cost implications of claims on insurance policies. The Financial Regulator’s periodic cost surveys seek to inform consumers of these costs. Our guide to Employer’s Liability and Public Liability insurance, published in December 2005, was prepared to help small businesses shop around for the best value in the marketplace when seeking Employers’ Liability and Public Liability insurances. We will continue to enhance the information we provide to consumers of insurance products on the costs, risks and benefits of those products.
The Joint Committee, while accepting the points made above by the Regulator, would prefer that its recommendation be accepted. However, this may be a question for individual insurance companies to address.
Given the complexity of the underwriting process and the number of factors that determine the level at which premiums are set, it is difficult to conceive how information on the basis of which the premium is calculated could be expressed in such a way that it was both meaningful to consumers on the one hand yet communicated the essence of the underwriting process on the other. It is also likely that any such information would have to be policy-specific, with all of the cost implications for consumers that this would entail.
In this regard it would be particularly useful if the Committee could provide some guidance on the precise information it believes consumers should receive.
This recommendation would particularly apply to employer’s liability insurance and public liability insurance. It is unsatisfactory if insurance companies only state the cost of the insurance without giving the basis on which that cost is calculated. The type of information we suggest should be included is as follows:
These are some items that we believe an insurance company should address in the information it provides to businesses, particularly small businesses, in respect of its insurance premium proposals.
We are grateful to the Joint Committee for the guidance provided. We will progress the Committee’s suggestions with the insurance industry and explore whether and how they can be given practical effect.
We note the response of the Regulator above. We look forward to the implementation of this recommendation.
We do not accept that production quotas should in any way impact on the obligations of intermediaries to give best advice.
All insurance intermediaries fall into one of three categories and are required to act at all times in the best interests of clients irrespective of the category to which the intermediaries belong.
Tied Insurance Agents:
These companies hold a single appointment from an insurer and may only sell and advise on the products of that insurer.
Multi-agency Intermediaries:
These firms hold a number of appointments (if they hold five or more they are legally entitled to refer to themselves as brokers). They may only sell and advise on the products of the insurers from whom they hold appointments. The degree to which their advice is truly independent is therefore limited by the number and the nature of the appointments they hold.
Authorised Advisors:
These firms may hold a number of appointments. However, they are required to give advice in relation to all product producers active in the market, including insurers from whom they do not hold appointments. These firms can most accurately be described as offering independent advice.
All intermediaries must, in their Terms of Business, inform clients of their regulatory status and of the number of appointments that they hold.
The Committee may wish to note that all insurance intermediaries are free to operate on a fee rather than on a commission basis.
As previously advised to the Committee, the Financial Regulator’s consultation paper on Remuneration Structures and Transparency (published in January 2005) sought views on whether or not “override” commissions (i.e. additional commissions or benefits payable to intermediaries for meeting agreed targets) should be banned or restricted. Later this year the Financial Regulator will publish a Public Response to that consultation.
It is the view of the Financial Regulator that production quotas should not inhibit independent advice. Accordingly we believe that this recommendation is not necessary. We will however consider this recommendation again in the context of the review referred to in response to Recommendation 53.
We note that you do not accept that production quotas should in any way impact on the obligations of the intermediaries to give the best advice. We also note that you are undertaking a review of the insurance broker insurance market. We suggest that this issue of production quotas should be included in your review.
Of course, no insurance broker should be influenced by a production quota in respect of the advice that is given to a policyholder and we fully acknowledge that you are correct in insisting that this should be the case. Nevertheless, we believe that the existence of production quotas must, inevitably, distort the insurance intermediary market.
As noted by the Joint Committee, we will consider the issue of production quotas in our review of the role and functioning of the intermediary market in Ireland.
The Regulator has promised a review of insurance intermediaries in early 2007. This review is of critical importance to ensuring that the insurance market works well for consumers and businesses.
The Financial Regulator has asked all insurers writing Employers’ Liability and Public Liability insurance if they stand willing to quote renewal business to brokers other than the broker that originally placed the business. All insurers have advised the Financial Regulator that they do, subject only to the enquiring broker holding an appointment from the insurer.
Any specific information that suggests that this may not be the case should be brought to the attention of the Financial Regulator. We will investigate the matter promptly. Accordingly, the Financial Regulator accepts this recommendation.
While accepting that any insurer should be able to determine its own route to market and to decide whether it will deal with intermediaries or not, the Joint Committee recommendation sought to achieve a level playing field between intermediaries. It is not satisfied that insurance companies have a right to make ‘an appointment’ of intermediaries. All registered or licensed intermediaries should be able to compete for the business. This is another issue that might be addressed by the review of intermediaries.
We have previously outlined for the Committee the possibilities that exist in Ireland for the establishment of captive insurance companies. However, as previously advised, the question of self-insurance for motor risk is a matter for the Department of Transport.
We have redirected this recommendation to the Minister for State at the Department of Transport.
We note that this recommendation has been redirected to the Minister for State at the Department of Transport.
The Joint Committee has had no response from the Department of Transport on this issue.
Individual businesses with large fleets of vehicles may wish to consider pursuing this issue with the Department.
The Committee should be assured that the Financial Regulator is always conscious of the importance of new market entrants for the promotion of competition in the Irish market.
The Financial Regulator does not however accept that the solvency requirements that form part of its prudential supervision framework are excessive. We are satisfied that our prudential supervision framework works to protect policyholders and that it conforms with international best practice generally.
We are aware of no instance where the solvency requirements applicable in Ireland dissuaded a potential market participant from entering the market. We also note that the Competition Authority’s Report on Competition Issues in the Non-Life Insurance Market stated that, ‘The Authority has not received evidence that IFSRA’s capital requirements have deterred insurers from entering the Irish market.’ In addition, the Committee may wish to note that the higher solvency cover for new market entrants is temporary and is intended to ensure that the insurer is financially robust This requirement is reviewed as the insurer’s claims experience becomes apparent.
The Financial Regulator considers that current solvency arrangements should be retained and will not implement this recommendation at this time. We have already drawn the attention of the Committee to the Solvency II project, under which fundamental changes to capital and solvency provisions will be implemented.
The Joint Committee accepts the response above. The critical issue is to ensure that Ireland’s solvency requirements do not reduce the attractiveness of the Irish market to potential entrants. The Solvency II project has the potential to ensure a level playing field throughout Europe.
Following on from Recommendation 48 above, the Financial Regulator agrees with the Joint Committee that, consistent with the need to protect policyholders and claimants, regulations should not inhibit the participation of new companies in the Irish market.
See response above.
The Financial Regulator fully supports the Committee’s objective of ensuring that consumers receive renewal notices in time to allow them to shop around for the best value.
We believe, however, that two months’ notice is too long because the interval between receipt of the renewal notice and the renewal date is of such duration that consumers may simply put the notice to one side and not act upon it. Instead we believe that a requirement to provide renewal notices to consumers, 15 working days for personal lines and 20 working days for commercial lines, in advance of the renewal date is about right. Accordingly, the Financial Regulator considers that the objective of this recommendation has been addressed.
Arising from the MIAB Report, FBD, at its meeting with the Joint Committee on 31 May 2006, stated that a regulation was introduced which decreed that insurance renewal notices must be issued to policyholders so as to be with them 15 days in advance of their insurance premiums falling due for renewal. In FBD’s experience, this regulation was not being adhered to by all players in the market, particularly insurance intermediaries. This was placing compliant companies at a competitive disadvantage. FBD called on the Financial Regulator to investigate.
Very great progress has been made in this area. The Joint Committee accepts that this recommendation has been implemented. It asks the Regulator to investigate the point made by FBD.
The Financial Regulator will conduct a review of the role and functioning of the intermediary market in Ireland. We will look at issues, inter alia, of transparency, accountability and competition and whether there is a need for legislative amendments.
This review does not form part of the current strategic plan of the Financial Regulator but will be incorporated into the next iteration of that plan covering the period from 2007 to 2009, development of which is in progress.
As we previously informed the Committee, the Financial Regulator has committed to looking at the names of the categories of insurance intermediaries following the publication of our Consumer Protection Code in July. Such a review, and indeed the broader review of the broker market recommended by the Committee, will also take account of the provisions of the Insurance Mediation Directive.
Accordingly, the Financial Regulator accepts these recommendations.
Again, this is a matter for consideration as part of the review of intermediaries.
The Committee asked the two principal bodies representing insurance intermediaries to give written comments on its recommendations. Their responses are presented below:
In General (Non-Life) Insurance there is an overall trend towards pursuing pricing and distribution strategies that are bringing about the destruction of the majority of small-scale broker firms. This strategy will have the effect of reducing competition between the General Insurers in the Irish market to the overall detriment of the consumer.
The most prominent example of these strategies is the price discrimination which exists between the different channels of distribution. Insurers will sell their products direct at a discounted price to the broker channel. Insurers will cite commission costs and product differentiation as the rationale for this strategy. The reality is that direct operators are also paid commission and the difference in products does not equate to the difference in price. The difference can be up to 30 per cent. It could be argued that this is of benefit to the consumer. PIBA would refute this claim. Brokers offer independent advice and choice to consumers. Brokers facilitate competition in the market which ultimately will bring prices to their market equilibrium level. This is currently not the case in the Irish General Insurance market due to other protectionist policies followed by insurance companies. Insurance companies know that once they have a client on their books they are unlikely to change insurer even though the price has increased. The broker industry is far more price sensitive. This is their reason for promoting direct business at the expense of broker business and there is only a short-term gain for consumers.
A broker should have access to all insurers in the market and their entire product range. In the Irish market, insurance companies are selective as to whom they give agencies and even when a broker has an agency they will often only be allowed access to a limited number of their products.
Some insurance companies follow pricing strategies with a view to forcing small-scale brokerages out of the market. These pricing strategies are introduced irrespective of the efficiency of the brokerage, the technology used or the brokerage’s distribution strategy. For example, brokers using the EDI system for motor insurance increased the efficiency of the process for the insurance company as administration costs were significantly reduced. In addition, all documentation is required to be kept by the broker, creating more work for him/her. However, no discount is offered on the client’s premium or additional commission given to the broker even though there are cost savings in the processing of the application.
There is a feeling within the broker community that competition in the market is being limited due to collusive practices on the part of larger insurance companies.
Recent reforms in the legal regulatory environment are producing cost savings, and are helping to increase the profitability of insurance producers. However, in order to ensure that cost savings continue to be passed on to consumers, the Financial Regulator should become more involved in policing the market distribution channels with a view to stopping anti-competitive practices. Examples of where competition is weak (where there are a small number of producers and where customers normally deal direct) is retail banking services and mobile phone accounts, both of which, in this market, are among the most expensive in the world. However, in the same market, mortgage lending rates are competitive and this is due to the competitive influence of brokers. Where the broker market is allowed to access products in an open manner, without hindrance from product producers, whether organised or not, it is evident that extremely competitive activity takes place to the advantage of the consumer. This is demonstrated in the Mortgage and Life Insurance markets. Where this access is hindered, competition is hindered. There is no logical reason for brokers not to have access to all products and rates offered by insurers or lenders. Producers do not like competition. There are a small number of players in the Irish insurance market, and they dislike distributing through truly independent intermediaries. The principal insurers have been, over the last ten years, overcharging car insurance through brokers in favour of direct channels. The reason for this is that if the difference was a broker’s commission, i.e. 5 per cent, hardly any customers would move to direct channels. In spite of the obvious cost of servicing clients through a branch network, which is the preferred option of the two main motor insurers, brokers in the main, and their customers, are discriminated against.
PIBA’s views on the Joint Committee recommendations were as follows:
PIBA would support this recommendation which would support our members’ views on cancellations of agencies for non-production and existing industry threshold. We also do not believe in bonus or additional commission based on volumes of business. Insurers should instead offer additional commission to encourage brokers to use more efficient systems. The Electronic Data Interchange is one example of a system whose use should be rewarded as brokers using such systems reduce the administration costs of the insurance company in processing insurance applications. Additional commissions should also be provided to assist brokers in upgrading their IT systems and to contribute to education and training.
Although a scheme may not be the most appropriate way to achieve this, PIBA would support this recommendation. The Competency Requirements should be enough to allow brokers to deal with all insurers. The current Multi-Agency Intermediary model is unnecessarily restrictive and is not working, causing confusion among consumers and industry alike.
PIBA supports this recommendation. The reasoning behind this would be that if a broker is dealing with a client they need to give a comprehensive service irrespective of broker / insurance company relationship. The client should be free to choose their broker which would encourage competition. The insurer should be forced to offer the same renewal terms for the same risk presented irrespective of the intermediary.
The question of competency testing has already been dealt with by the Financial Regulator. The Minimum Competency Requirements come into force in January 2007 and will apply to all brokers. These requirements set out the exams brokers will be required to take before advising clients on the various financial products. The requirements also provide for ongoing education and training through the Continued Professional Development (CPD) programme.
It is understood that the MAI and AA classifications will come under review by the Financial Regulator in early 2007. PIBA has consulted with the Financial Regulator and the Department of Finance on this issue. The classifications cause confusion among consumers and are not practical to brokers. We are advocating a return to the old insurance broker system which was recognised by consumers as giving choice. This system should be dovetailed with the IMD (Insurance Mediation Directive) to give ‘fair analysis’ – based on a sufficiently large number of contracts in the market as to give a recommendation of a contract adequate to meet the needs of the consumer. We are advocating a system of insurance brokering whereby such fair analysis could be based upon:
Multi-agency intermediaries would advise on less than the minimum required for ‘fair analysis’ (e.g. three or less) and tied agents just one. Both of these would only advise on contracts where they hold the relevant agency.
In light of the incoming Minimum Competency Requirements, all brokers should be given full access to all the products on which they are qualified to give advice. The Financial Regulator should abolish protectionist policies in the general insurance market, such as:
These strategies are designed to increase the profitability of insurance companies by stifling competition. They do not benefit the consumer in any way. Giving brokers access to all products in the market will create true competition in the market. This will benefit the consumer through lower prices and will allow brokers to find the most suitable product for their clients.
PIBA feels that the market is already reasonably transparent due to the fact that the Consumer Protection Codes provide for the disclosure of a vast range of documentation to the customer. There are very few comparable markets where there is such a level of transparency associated with a product. The question implies that there are currently problems around transparency. This is not the case.
Since 2005 we have seen the implementation of additional regulation of insurance intermediaries through:
The Financial Regulator has also published on 25 July 2006 Minimum Competence requirements for all those providing advice on and arranging ‘retail financial products’ for consumers, with effect from 1 January 2007. The term ‘retail financial products’ is defined as including all types of general insurance policies.
With effect from 1 January 2007 all individuals advising on and arranging general insurance policies for consumers (including those who settle insurance claims) will be required to either have a recognised professional qualification or be ‘grandfathered’ on the basis of having at least four years’ (during the last eight) relevant professional experience.
In addition, all insurance advisers will be required to comply with an ongoing Continuing Professional Development (CPD) requirement in order to keep their expertise up to date.
IBA saw education as being the key to improving the overall professionalism of the broking industry. IBA has led the way in producing a broker-specific education programme called Certified Insurance Practitioner (CIP); this programme has been approved by BIPAR (Bureau International des Producteurs d’Assurances et de Réassurances), which is the European representative body for insurance brokers, and meets the requirements set out in the Insurance Mediation Directive. The IBA education programme has been approved by the Financial Regulator and now forms part of the new industry-wide Minimum Competence requirements.
We would like to raise two issues with the Committee: (a) the impact of overregulation of insurance intermediaries and (b) actions to reduce insurance premiums further.
Insurance intermediaries are subject to two overlapping and, in some respects, conflicting regulations:
The Investment Intermediaries Act, 1995, provides for a system of regulation of ‘investment’ firms, under the EU Investment Services Directive 1993/22, a system of regulation completely unsuited to the regulation of insurance intermediaries. Basically, a system of regulation designed for investment fund managers, etc., was applied in Ireland by the then Central Bank to ‘insurance intermediaries’.
The EU Insurance Mediation Directive, 2002/92 represents the EU-wide agreed system of regulation of all those involved in insurance mediation. It is a far less complex regulatory system than that provided by the Investment Services Directive, reflecting the simpler range of functions and activities insurance intermediaries perform.
However, uniquely in the EU, Ireland has implemented the EU Insurance Mediation Directive system of regulation for insurance intermediaries on top of the existing Investment Services Directive Regulation (i.e. the Investment Intermediaries Act, 1995), leaving Irish insurance intermediaries subject to two different systems of regulation.
This is completely unnecessary and contrary to many of the Government ‘Better Regulation’ principles announced in January 2004, e.g.: necessity, proportionality and consistency.
For example, we now have two different definitions of what a tied insurance intermediary is, one in the Investment Intermediaries Act, 1995, and another different in the European Communities (Insurance Mediation) Regulations 2005.
We would also draw the Joint Committee’s attention to the bungled implementation of the European Communities (Insurance Mediation) Regulations 2005 in January 2005. The Regulations contain many drafting errors; for example, banks acting as insurance intermediaries were erroneously exempted from the provisions of the regulations, something not allowed for by the Directive. A new modified set of regulations was promised by the Department of Finance, but some 18 months later they have not appeared.
Overregulation adds costs to the industry, costs which ultimately are paid by the consumers through their insurance premiums.
Double regulation of insurance intermediaries is entirely unnecessary and places Irish-based insurance intermediaries at a disadvantage to insurance intermediaries from other EU Member States who can conduct business here solely on the basis of their regulation under the Insurance Mediation Directive.
We would therefore urge:
Insurance premiums have traditionally followed a ‘cycle’, going up and down over a period of years as underwriting profits fall and rise, respectively.
Our members feel that we may now be at the bottom of the underwriting cycle and with reports of increased claim frequencies, premiums may be about to start increasing again. This is part of the business cycle.
Driving premiums too low, i.e. below the level justified by the underwriting cycle at that stage, is not necessarily in the consumer’s best long-term interests as it can cause a withdrawal of some underwriters from the Irish marketplace, thereby reducing capacity and competition from the marketplace.
The only effective and sustainable way to drive premiums lower than they currently are is to make some substantial impact on reducing both the incidence and amount of claims from their current level.
In relation to motor insurance, this again points to the need for effective enforcement of road safety measures.
32 Production Quotas
We support this measure as the impact of production quotas on insurance intermediaries as a requisite to hold on to an agency appointment with an insurer is an odious practice as it amounts to a restriction on trade for insurance brokers.
Insurance intermediaries can legally only arrange insurance policies for clients with insurers from whom the intermediary holds an agency agreement. The withdrawal of an agency agreement therefore prevents that broker from using that insurer for any client and thus reduces competition in the marketplace.
33, 51 Insurance Brokers
We feel that these two recommendations are to some extent linked, as they relate to the potential ability of insurance brokers to recommend and/or deal with any insurance company.
We would make the following points:
We feel there is merit in:
We feel that such a system has the merit of simplicity for the consumer; the term ‘insurance broker’ would then mean intermediaries who only provide ‘fair analysis’ advice, which is a term used and defined in the European Directive on Insurance Mediation as being the highest and best level of advice the consumer can get. It is an EU-wide measure of independent advice on insurance.
34Discrimination against Competing Broker
Currently a client will complete a reporting mandate to enable a competing broker to obtain all information from the existing insurer. This is a straightforward process which requires a properly dated and signed reporting mandate from the policyholder in person or in the case of a company, the Managing Director, Financial Controller or Secretary of such Company.
We would feel that the current situation does not discriminate against the competing broker receiving all available renewal information.
53Improving Transparency
We support the principle of transparency in relation to:
PROVIDED it is implemented on a uniform and consistent basis across the ENTIRE industry and not just applied to insurance intermediaries.
In relation to transparency of insurance sales remuneration / commissions, we would cite the example of the Life Assurance Disclosure Regulations which has implemented a satisfactory disclosure regime for life assurance policies since 2001.
The Life Disclosure Regulations, in relation to disclosure of remuneration associated with the sale of a life policy, requires equivalent disclosure as between:
This therefore ensures equivalent and consistent disclosure of ALL remuneration associated with the sale of the life policy. The entire life disclosure system is backed up by very detailed Society of Actuaries Guidance Notes for insurers on how to calculate both intermediary and sales remuneration.
Calls for insurance intermediaries to be subject to ‘transparency’ of remuneration in relation to motor and liability insurance is ‘selective’ transparency if it is applied only to insurance intermediaries. If it is not also applied to insurers writing such business directly, it will distort the marketplace to the advantage of insurers writing business directly, which in the long run is not to the benefit of the consumer.
Unlike investment-related policies, the premium payable by the consumer for motor and liability insurance is the barometer of ‘value’ to the consumer, assuming cover and benefits are identical in products being compared. On this basis, we doubt the value of transparency of remuneration in relation to such policies.
If consumers dealing direct with an insurer see no disclosure of ‘remuneration’ but see such disclosure of dealing through an insurance intermediary, they may naturally come to the erroneous conclusion that they can ‘save’ the intermediary remuneration by dealing directly with the insurer.
However, if transparency of remuneration in relation to the sale of motor and liability insurance is to be introduced, it MUST apply equally to all distributors, i.e. intermediaries and direct writers alike, if harmful (to the consumer) distortion of the marketplace is not to ensue.
Regulators should learn the lessons of the successful Life Disclosure Regime, which has been in existence now for over five years.
It is clear that financial regulation, including regulation of the non-life insurance sector, in Ireland is being undertaken in a very professional way by an excellent regulatory body, the Irish Financial Services Regulatory Authority. The Joint Committee is pleased with the cooperation it has had from the Financial Regulator since it was established.
All of the points of concern to the Joint Committee have been responded to and the Joint Committee has accepted that many of its recommendations have been implemented or that there has been a satisfactory explanation as to why the specific recommendation does not now need to be implemented.
The following recommendations have been accepted: 48, 49, 51. Recommendations 24 and 25 are no longer issues for the Regulator to deal with. Regulation 26 is being progressed by the Regulator.
The most important area to be addressed by the Regulator in 2007 is the issue relating to insurance intermediaries. Some of the recommendations of the Joint Committee are critical to ensuring that the insurance market operates effectively. The review of intermediaries will deal with recommendations 32, 34, 52, 53.
Finally, recommendation 40 is addressed to the Department of Transport.
Chapter 4 shows that insurance companies are reporting significant reductions in the level of premiums being charged.
The tables below have been prepared from the Insurance Statistical Review 2005, 2004 and 2003, published by the Financial Regulator.
2005 Profits €million |
2004 profits € million |
2003 profits € million |
2002 profits € million |
|
Allianz |
151 |
156 |
86 |
(22) |
AXA |
149 |
151 |
124 |
52 |
FBD |
121 |
94 |
89 |
21 |
Hibernian |
280 |
228 |
118 |
71 |
Quinn Direct |
163 |
126 |
101 |
34 |
TOTAL |
864 |
755 |
518 |
156 |
+14% |
+ 46% |
+ 232% |
Note: In the year to 31 December 2005, there were profits for other major companies as follows:
AIG Europe, €39 million
Zurich Insurance Ireland, €99 million
Royal and Sun Alliance, €71 million
Reserves for Outstanding Claims |
|||||
Premium Income for Year 2005 € million |
31 December 2005 € million |
31 December 2004 € million |
Change on Year % |
Reserve for Claims at 31/12/05 % of Premium Income |
|
Allianz |
426 |
964 |
974 |
-1% |
226 |
AXA |
394 |
1109 |
1123 |
-1% |
281 |
FBD |
336 |
642 |
596 |
+8% |
191 |
Hibernian |
729 |
1616 |
1620 |
0 |
222 |
Quinn Direct |
391 |
431 |
365 |
+18% |
110 |
TOTAL |
2,276 |
4,762 |
4,678 |
209 |
|
Source: 2004 and 2005 information from Insurance Statistical Review issued by the Financial Regulator
2005 |
2004 |
Difference % |
|
Motor |
1,635 |
1,712 |
-4.5 |
Fire and Damage to Property |
1,075 |
1,128 |
-4.7 |
Liability |
848 |
909 |
-6.7 |
Other |
539 |
558 |
-3.4 |
Total |
4,097 |
4,307 |
-4.9 |
The reductions in premiums as presented above have taken place against the backdrop of an increased number of motor vehicles and employees in 2005 compared with 2004.
The Joint Committee wishes to see insurance premiums continuing to fall. In the Third Interim Report we expressed concern about some developments in 2005:
However, road fatalities in 2006 are lower than in 2005 and the fatalities at work have also fallen.
The Joint Committee also hoped that the recommendation below would be implemented:
In Chapter 7 we deal with the reasons why the implementation of this recommendation has been deferred for the present.
However, until the level of awards in Ireland is brought into line with the level of awards in similar jurisdictions, Ireland cannot have the level of insurance premiums that apply in other countries. Until that happens, consumers and businesses are at a disadvantage.
The Joint Committee is disappointed that, even though very substantial regulatory reforms have been enacted, no new substantial companies have entered the Irish Risk Insurance Market. The Minister for Enterprise, Trade and Employment visited London in October 2006 to encourage additional insurance companies to enter the market.
Clearly, however, the market is competitive.
The following information was supplied by Mr John Casey, CEO of the MIBI (Motor Insurers’ Bureau of Ireland) on 26 July 2006 in response to a request for information by the Joint Committee.
The main task of the MIBI is to compensate innocent victims of uninsured and untraced driving in Ireland. In 2005 MIBI received 1,628 claim notifications from victims of uninsured and untraced driving involving Irish registered vehicles, compared to 2,294 in 2004. The 2005 figure was the lowest in many years; however, this apparent positive development was influenced considerably by factors in the overall claim environment such as the Courts Act and the first full year of the operation of the PIAB. During the first half of 2006, MIBI received 1,060 claims, indicating a return to more customary levels.
As part of its remit, MIBI acts as the ‘deemed insurer’ of all foreign-registered vehicles (FRV) travelling in the State. A victim of an accident caused by an FRV is entitled to submit a claim to MIBI. We then endeavour to identify an insurer of the vehicle in the home country of the FRV and we are successful in doing so in over 85 per cent of the cases. Thus, the ‘uninsured component’ of claims reported to us involving FRVs is less than 15 per cent. In 2005 the number of claims involving FRVs was 881 compared to the 2004 figure of 790. Thus, 15 per cent of 881 were deemed to be uninsured (i.e. 130). These figures are separate and distinct from those in point 1 above. These latter claims are handled by MIBI and settlements are made with the claimants. MIBI then requests reimbursement from its counterpart bureau in the home country of the uninsured FRV.
While MIBI does not track the incidence of left-hand drive FRVs compared to right-hand drive FRVs, it is generally true that almost all FRVs travelling in the State would be left- hand drive vehicles with the obvious exception of UK-registered vehicles. Therefore, of the 881 accidents involving FRVs in 2005, 303 were UK-registered (and would have been right-hand drive), while the balance (578) could be assumed to have been left-hand drive.
MIBI has encountered instances of claims involving vehicles which had forged or invalid insurance discs. However, we do not keep a numerical count of these as our brief is to process the claim and ensure that appropriate compensation is remitted to the victim.
The incidence of uninsured driving in Ireland is estimated at 6 per cent or roughly 100,000 drivers. This is the highest in Western Europe and total claims compensation to victims of uninsured and untraced driving has been in the region of €50m in each of the years from 2001 to 2004 inclusive. In 2005 it reached €67m, due to several large claims being settled during that year. This money comes entirely from the premiums of the 94 per cent of law-abiding motorists who insure their vehicles every year. The cost of uninsured driving to each motor premium is estimated at €45.
MIBI believes that the main cause of uninsured driving is the irresponsible behaviour of the 6 per cent of drivers who do not insure their vehicles. The most effective method of changing this behaviour is increased and robust enforcement of the law by An Garda Síochána, particularly in areas which have high instances of accidents caused by uninsured driving, supported by adequate and proportionate penalties for those guilty of the offence.
A comprehensive report on ‘Uninsured Driving in the UK’ for the British Government was completed in 2004 by Professor David Greenaway of Nottingham University. A full copy is attached for your information. Chapter 1 is a summary of recommendations and we believe that many of these, if implemented in Ireland, could make a material impact on the incidence of uninsured driving and so reduce motor premiums for business and the general public alike. Specifically could I draw your attention to:
The insurance industry and Department for Transport should cooperate in building an easily navigable and searchable insurance portal on the DVLA and DSA websites, which reminds clients of their legal responsibility for third-party insurance, provides rapid access to information on insurance premiums and links to online purchase facilities.
Appropriate changes in the Police Bill should be made, or the next available legislative opportunity taken to provide Police Forces with full and unrestricted access to the Motor Insurance Database (MID).
The MID should be fully integrated with the Police National Computer in the same way as DVLA’s vehicle register.
The roll-out of Automatic Number-Plate Recognition (ANPR) should be accelerated to ensure that more Police Forces have access to the technology to underpin enhanced detection and enforcement.
Sentencing guidelines for Magistrates should be revised to require a minimum fine for uninsured driving which exceeds the fixed penalty.
A review should be undertaken of the non-fiscal penalties which could be made available to Magistrates in dealing with uninsured drivers.
If the above actions are taken, and the other recommendations in this report are implemented, it is reasonable to expect that insurance premiums will continue to fall in 2007.
Most insurance companies considered that premiums could fall further in certain circumstances. However, AXA stated that:
there would not be profits from the insurance sector of €1 billion in 2007; the sector had reached the end of the insurance cycle. AXA was breaking even on current business. As competition increased, AXA would lose money on underwriting. AXA was probably the first company to state that it was making a profit in the current cycle. It believed that it was the first company to recognise that ‘the game was over’. Prices would have to start rising again.
These comments were made in May 2006 before the level of fatalities due to road collisions started to fall and before it was clear that the level of fatalities at work was also falling.
Until the establishment of the Office of the Financial Regulator, insurance issues were the responsibility of the Minister for Enterprise, Trade and Employment. With the establishment of the Financial Regulator, the Regulator took over responsibility for all insurance regulation, including the provision of statistics. The only responsibility that was left to the Minister for Enterprise, Trade and Employment was the Personal Injuries Assessment Board (PIAB).
The Financial Regulator comes under the aegis of the Department of Finance, which has overall responsibility for the Financial Regulator’s office. However, the Financial Regulator’s role is to implement existing legislation, to act in the interests of consumers and to exert prudential responsibility for the areas under the Regulator’s control. The Financial Regulator is not concerned with policy or with developments that have not been given effect in legislation.
Shortly after the transfer of responsibility for regulation to the Financial Regulator, the Government decided that the Minister for Transport should have responsibility for motor insurance. However, it appears that no Minister has responsibility for policy in relation to all other risk insurance. It is reasonable that the Minister for Finance should have responsibility for life-related insurance but it is less clear that the Minister for Finance should be concerned with non-life risk insurance.
The Joint Committee believes that the Government should address this issue and allocate responsibility for non-life risk insurance, excluding health insurance which is the responsibility of the Minister for Health and Children, and motor vehicle insurance which is the responsibility of the Minister for Transport, to the Department of Enterprise, Trade and Employment. The most important other elements of risk insurance are Employers’ Liability and Public Liability Insurance. It would seem reasonable that these should be dealt with by the Minister for Enterprise, Trade and Employment, rather than another Department.
In general, it would be preferable if one Minister had responsibility for all non-life risk insurance, and this is a further issue the Government might consider.
If responsibility is not allocated, there is a danger that the important further reforms, will not be the responsibility of any Minister or Government Department. Reform in this area is never likely to be complete. Each year will bring about legislative or other developments such as court decisions and new technical developments that may require legislation or Government intervention.
The Joint Committee recommends that:
It is not clear who is responsible for the control of motor vehicles and drivers. The responsibility for car registration tax was delegated a number of years ago to local authorities. The local authorities have come together to provide an online tax renewal service based in Shannon. However, the recording of car registration details in Shannon cannot be cross-checked to see that the motor vehicle is insured. At present, ensuring that a car is insured is the responsibility of the Gardaí, presumably the Traffic Corps, but also any Garda. The responsibility is carried out by inspecting car tax, car insurance and National Car Test (NCT) certificates that are required to be placed on the windows of motor vehicles. However, the Gardaí have no readily available method of checking whether the displayed certificates are real or forgeries. It would be helpful if it were at least possible to ensure that when car tax was being renewed, the car was both insured and had passed the NCT. For this to be achieved it would be necessary to integrate the car tax records with those of insurance companies and the NCT.
It is clear that, for each motor vehicle, there needs to be a number of records maintained on a central database. These include the following:
For individual drivers, as distinct from motor vehicles, there also needs to be very extensive records maintained on a central database.
I. the driving licence number
II. the PPS number
III. whether the driver has passed tests and how many times the tests have had to be undertaken
IV. the name, age, address of the individual driver
V. any penalty points incurred by the driver
VI. any previous convictions related to motor vehicle prosecutions.
A system is needed whereby a Garda on checkpoint duty can easily check that the car is insured and that the driver is permitted to drive the car (and has not therefore been disqualified from driving).
For all of these reasons, there would seem to be a need to establish a Motor Vehicle Agency that would establish a database of motor vehicles and of drivers, and would make this database available to An Garda Síochána.
The Agency could have primary responsibility for checking that motor tax had been renewed, that insurance policies were being renewed and that disqualified drivers were not driving. These checks could be done by civilian employees through administrative means. Only where administrative means have failed to achieve results should An Garda Síochána be involved in specific cases.
The Joint Committee has been very concerned at the numbers of uninsured drivers. In spite of considerable effort by the Gardaí this number is not declining. Progress is not being made. The number of uninsured drivers is a burden on all other drivers.
The Gardaí need to have a computer system that would allow a Garda, on approaching a vehicle, to scan the registration number into the system and to receive full and accurate information on the vehicle. On receiving the driver’s licence, it should be possible to scan a bar code that would provide all relevant information on the driver.
As each driver is paying €45 per year for uninsured vehicles, a proportion of this amount would fund the system and ensure that almost every vehicle is insured, taxed and has completed the NCT test. It would also reduce the incidence of stolen vehicles and assist in reducing crime. It has been said that while the vast majority of drivers are not criminals, all criminals are drivers. By ensuring that there is a tight control on vehicles and drivers, general compliance with the law will improve.
It is clearly unacceptable that Ireland has the highest level of uninsured driving in Europe. Our objective must be to be among the lowest two or three countries in the level of uninsured driving.
64. A motor vehicle agency should be established by the Department of Transport to:
Before this report, the Joint Committee had made 87 Recommendations. Of these, 29 were made in the Road Safety Report of July 2006.
Of the remaining 58 recommendations:
Each of the recommendations has been considered in detail in the five reports of the Joint Committee. We include some brief comments on the 15 recommendations whose future implementation should be monitored by the Joint Committee on Enterprise and Small Business of the 30th Oireachtas and also a brief comment on the two recommendations that are, in our view, the only ones that have not been accepted.
The provisions of the Court Bill, 2001, in relation to the financial limits of courts, should be brought into force, and the Courts Service should bring forward proposals to reform the courts as a matter of urgency.
The Joint Committee felt strongly that this recommendation should be implemented. However, it was persuaded that in the light of all the other changes in the law that were being made – the establishment of the PIAB and the general legal reforms – that the implementation of the Court Bill, 2001, should wait until a clear picture emerges.
It would be reasonable to assume that this issue should be reviewed within two years.
The Government should negotiate a common European market protection for insurance policyholders against the insolvency of an insurer.
This recommendation has essentially been accepted. The Financial Regulator is arguing that this protection be provided as part of European insurance arrangements. Again, this recommendation should be implemented within two years and, if not, the Oireachtas should establish why this has not happened.
The Irish Financial Services Regulatory Authority should facilitate the placement of Irish motor insurance business outside the jurisdiction by amending existing regulations.
The Financial Regulator has stated that this would require legislative change and is the responsibility of the Department of Transport. This is of particular importance for commercial vehicles that may be travelling outside Ireland. It is a measure that should increase competition in the commercial insurance market.
An arrangement should be entered into between insurance companies and hospitals that would refund hospitals for the cost of treating injured persons at normal health insurance rates but that would avoid the pursuit of individuals to make claims on insurance companies.
It seems to be generally agreed that this is a good idea. However, it needs someone like the Minister for Transport or a Minister for State to bring the insurance companies and the Health Service Executive (HSE) together to work out an arrangement. So far this has not been done.
The Government should establish an expert group that would consider the information now published by the PIAB on the levels of awards in the Irish courts, the levels of UK awards and the levels of awards in other jurisdictions. This group would recommend a level of awards that would be appropriate to Ireland. The recommendations of the group should be published in draft form to allow all interested parties, including representatives of victims, to make submissions on the proposals.
This issue has been dealt with extensively in Chapter 7. Essentially, the Joint Committee feels strongly that the Irish awards are out of line with those in the UK and other jurisdictions. However, the Joint Committee also accepts that in the light of all of the other changes that have been made and are being made, that the proposed establishment of an expert group could be deferred. This inquiry should be established within two years.
Legislation should be introduced to permit the keeping of central records on claimants by insurance companies, subject to appropriate safeguards.
This recommendation, which is essential if there is to be proper coordination between the various agencies, should be introduced. However, it could reasonably be argued that it is not a high priority. Nevertheless, this should be introduced within two years with a view to permitting the keeping of central records on claimants by insurance companies with appropriate safeguards, particularly in relation to the Data Protection Act.
Where a policyholder objects to a settlement of a claim by an insurer, the insurer should not be able to settle the claim unless, having asked for an arbitrator to consider the issue, the arbitrator finds in favour of the insurer. The losing party should pay for the arbitration.
The Joint Committee pursued this issue strongly with the Financial Regulator. However, the Regulator argued, reasonably, that this would require a change in legislation. The Joint Committee then amended its view to a request for a voluntary arrangement between insurance companies and policyholders on this issue.
In the view of the Joint Committee, a Minister needs to intervene on this issue and to work out an arrangement with the insurance companies. Again, this should be reviewed in two years’ time.
All regulatory barriers or regulatory impositions on insurance companies that make entry to the Irish market (for Irish or other EU companies) more difficult than to any other EU country should be removed by the Irish Financial Services Regulatory Authority immediately.
The Financial Regulator argues strongly, and quotes the Competition Authority, that Irish solvency and other regulatory requirements have not been a barrier to the establishment and operation of insurance companies in the State. Nevertheless, it is important that the Joint Committee should again check that Irish regulatory requirements are in line with those of other EU countries and that our regulations and, in particular, our solvency requirements are not out of line with those in other countries so as to form any type of barrier to entry to the market. Again, a review in two years would be satisfactory.
The Taxing Master should not be, nor have been, a member of the legal profession. The decisions of the Taxing Master should be subject to appeal to a lay appeals body.
The Minister for Justice, Equality and Law Reform established an inquiry into legal costs. The establishment of this inquiry was welcomed by the Joint Committee. The inquiry team reported in January 2006. The Minister then established a Working Group to implement the recommendations of the inquiry. The issue of the role of the Taxing Master was examined by the inquiry group. However, no decisions have yet been made on this or any of the other issues. Again, the Joint Committee should consider this matter further in two years’ time.
In-house barristers should have a right to appear in court in defence of claims against the insurance companies that employ them.
The Joint Committee made this recommendation. The response of the Department of Justice was that it was awaiting the final report of the Competition Authority. The Competition Authority reported in December 2006 and made a similar recommendation. The Department of Justice should now implement this recommendation. Again, this matter should be reviewed by the Joint Committee in two years’ time.
An annual awards scheme should be introduced to recognise the companies that have had no accidents for several years and those that have made a significant effort to improve safety.
There are a number of award schemes already in place, particularly those of NISO. However, none of the schemes seems to be precisely what the Joint Committee recommended. Again, this is another issue that should be subject to review in two years’ time.
The Health and Safety Authority and the insurance companies should specify appropriate health and safety standards with a view to offering premium reductions for companies that comply with such standards.
The Health and Safety Authority has accepted this recommendation but, insofar as the Joint Committee is aware, the recommendation has not yet been implemented or agreed with the insurance companies. Again, the Joint Committee should consider whether this recommendation has been implemented in two years.
Organisations, meeting certain financial criteria, should be able to self-insure for all motor risks.
The Joint Committee pursued this recommendation with the Financial Regulator. However, the Financial Regulator stated that new legislation would be needed and that this was the responsibility of the Minister for Transport. The Minister for Transport has not yet introduced new legislation to give effect to this recommendation. The purpose of this recommendation is to provide even greater competition in the motor insurance market. Even if legislation is introduced, there may be few companies willing to undertake these risks by self-insuring. Nevertheless, this option should be made available.
Again, a review in two years to ensure that this recommendation has been given effect would be satisfactory.
Insurance companies should provide significant incentives / penalties to young drivers between the ages of 17 and 25 to use governor or cruise-control limits in cars.
The insurance companies have a significant role to play in relation to road safety. The insurance companies have the power to make road safety features on motor vehicles a requirement of obtaining a policy or obtaining discounts on premiums. The structure of charges for motor insurance can be such that a clear benefit can be seen by those agreeing to accept or install safety features that will ensure safer driving.
It is disappointing that insurance companies, undoubtedly for good reasons, have not implemented this recommendation at this time. Again, a review in two years and a questioning of the insurance companies as to why the recommendation has not been implemented would be satisfactory.
In order to encourage drivers to stay within the speed limits, all insurance companies should be required to offer significant discounts to drivers who voluntarily accept monitoring of their speeds; these discounts to vary depending on the perceived risk and to be substantial for young drivers.
This recommendation has a similar objective to number 45 and again a review of the position in two years’ time would be satisfactory.
The National Council for Curriculum and Assessment should make early provision for the inclusion of the driver theory test for secondary school students as part of their Transition Year studies. In addition, secondary schools should be required to provide simulated driving instruction for all students on reaching 17 years.
The members of the Joint Committee have felt very strongly that far more could be done in our secondary schools to promote road safety and safer driving. While there could be an argument that the teaching of driving should not take place in the school environment or as part of the educational system, there is almost no argument against the inclusion of the driver theory test on the curriculum for secondary school students. Again, the Joint Committee should review the position in two years.
The 2 per cent levy, which is now merely a source of tax revenue, should be abolished.
The Joint Committee believes that the 2 per cent levy should be abolished. In view of the general health of the State’s finances, this would certainly have been possible over the last few years. It is disappointing that this has not been done. However, the Minister for Finance has refused to make this change. Alternatively, the Joint Committee would like to see the monies from the 2 per cent levy allocated for specific purposes, such as road safety, or health and safety at work. However, the Department of Finance argued that it did not wish to commit to a specific allocation of tax revenues.
The proposed Road Safety Authority should be independent in the carrying out of its functions and should be adequately and jointly funded by the Exchequer and the insurance companies, to finance its activities.
There is no specific provision in the Road Safety Authority Act in relation to the independence of the Authority.
Section 25 permits the Minister, with the consent of the Minister for Finance, to advance the Authority such sums as the Minister will determine for the purposes of expenditure of the Authority in the carrying out of its functions or in specified circumstances that are subject to Ministerial direction.
Essentially, the Exchequer finances the Road Safety Authority. The Road Safety Authority is an agency of the Department of Transport, rather than a body that is quite independent of the Department with its own funding.
While the 29 recommendations have been generally welcomed by the Road Safety Authority, An Garda Síochana and the Minister for Transport, the Joint Committee has had no specific feedback on its proposals. However, as is pointed out in Chapter 2, there have been a number of indications that at least some of its proposals are being accepted. The Road Safety Authority is due to publish its Road Safety Strategy for the next five years in the spring of 2007. It is hoped that this strategic document will incorporate a number, if not all, of the recommendations of the Joint Committee.
Wednesday, 17 May 2006
AXA Insurance |
Mr John O’Neill, Chief Executive Officer |
Hibernian General Insurance |
Mr Dick O’Driscoll, Managing Director Mr Brian Huston, Director Ms Laura Booth, Executive Manager |
Quinn Direct Insurance |
Mr Colin Morgan, General Manager Ms Sylvia Goldrick |
Wednesday, 31 May 2006 |
|
FBD Insurance |
Mr Philip Fitzsimons, Chief Executive Mr Andrew Langford, Finance Director Mr Niall Higgins, Claims Director |
Financial Regulator |
Mr Patrick Neary, Chief Executive Mr Frank Brosnan, Insurance Supervision Department Mr John Pyne, Consumer Information Department |
IBEC |
Mr Tony Briscoe, Assistant Director |
SIMI |
Mr Cyril McHugh, Chief Executive Mr Jim Cusack, President Mr Ian MacNeill, Deputy President Mr Alan Nolan, Deputy CEO |
Wednesday, 14 June 2006 |
|
Health and Safety Authority |
Mr Tom Beegan, Chief Executive Ms Mary Dorgan, Assistant Chief Executive Mr Robert Roe, Programme Manager |
National Roads Authority |
Mr Michael Egan, Head of Corporate Affairs Mr Harry Cullen, Senior Project Manager |
Wednesday, 11 October 2006 |
|
Allianz |
Mr Brendan Murphy, Director and Chief Executive Mr Sean Meagher, Director of Risk Management Mr Damien O’Neill, Associate Director, Direct Insurance |
Wednesday, 18 October 2006 |
|
Personal Injuries Assessment Board |
Ms Dorothea Dowling, Chairperson Ms Patricia Byron, Chief Executive |
Wednesday, 8 November 2006 |
|
An Garda Síochána |
Assistant Commissioner Eddie Rock Inspector Con O’Donohue |
The Road Safety Authority |
Mr Noel Brett, Chief Executive Officer |
Wednesday, 22 November 2006
Mr Martin Cullen, T.D., Minister for Transport
A Recommendations Implemented or Accepted: Insurance Generally
1Sanctions for breaches of compulsory motor insurance obligations should be introduced as quickly as possible and, in particular, uninsured vehicles should be confiscated.
6Policyholders should see clear evidence of the benefit of being claim-free. Accident-free policyholders or those with low levels of accidents should be seen to be rewarded.
8The proposed Civil Liability and Courts Bill should contain a provision that would require judges, on making decisions in relation to the level of awards, to have regard to the Book of Quantum applied by the PIAB.
9The PIAB, as soon as possible and certainly within six months of its establishment, should deal with public liability and motor accident claims, as well as employers’ liability claims.
10Where, not having accepted a PIAB award, the court award is equal to or less than a PIAB award, legal costs should not be allowed to the claimant.
11The measures in the proposed Civil Liability and Courts Bill to eliminate fraudulent and exaggerated claims should be adopted.
12Specific judges should be allocated to deal with personal injury cases and they should be required to undertake training in relation to insurance issues.
19The Irish Financial Services Regulatory Authority should review the Irish solvency regulations to ensure that they are in the best interests of policyholders, existing insurance companies operating in Ireland and potential entrants.
20The Government should permit insurance companies, as part of their solvency requirements, to invest in public / private partnerships and infrastructural projects on a basis to be determined annually by the Minister for Finance.
21An annual review of the insurance market should be carried out by the Joint Committee to consider whether its expectations of reform are being realised.
23The Irish Financial Services Regulatory Authority should give effect to the IBEC / Insurance Industry Federation Communications Guidelines by statutory order, so that the guidelines have the power of law.
25Policyholders should see clear evidence of the benefit of being claim-free. Accident-free policyholders or those with low levels of accidents should be seen to be rewarded.
26All policyholders should, on renewal, receive information on the basis of which the premium is calculated.
27The Competition Authority should publish at least an interim report on the insurance market before the end of 2003.
28The Government should establish an inquiry, composed mainly of non-lawyers, into the present levels of legal fees in personal injury actions. The inquiry would undertake a study of the costs and would consider whether the current level of fees being awarded by the Taxing Master are reasonable in relation to the work being undertaken by solicitors in preparing cases for trial. This inquiry would also consider the necessity for the extensive use of barristers in personal injury actions in Irish courts.
35IFSRA, the Irish Financial Services Regulatory Authority, should give consideration to the issue of whether brokers should operate only on a fee basis.
37The Health and Safety Authority should be properly resourced so that Irish safety performance levels become among the best in the EU and it should meet the target of 8,000 inspections per annum.
39The Bill to make new provisions for health and safety should be introduced immediately.
41The Departments of Finance and Justice, Equality and Law Reform should remove any impediment to the impounding of uninsured vehicles by the Gardaí.
46The new Safety, Health and Welfare at Work Bill should be passed by the Oireachtas as soon as possible.
47The Competition Authority should publish its final report on the insurance market as soon as possible and not later than then end of October 2004.
48The Irish solvency requirements for new entrants should be exactly the same as for existing market participants.
49Irish solvency requirements should be no higher than the norm required by EU regulation.
50IFSRA should monitor the level of insurance capacity in the Irish market and, where there is a lack of capacity, should draw attention publicly to the emerging difficulty.
51Insurance companies should be required to remind policyholders of the renewal date two months prior to renewal and to submit a quotation to the policyholder one month prior to the renewal date.
53IFSRA should carry out a fundamental review of the insurance broker market with a view to substantially improving the operation of that market, particularly in relation to transparency for the consumer.
14The Government should immediately bring in legislation for the regulation of driving schools.
15Penalty points should be extended to all motoring offences affecting road safety as quickly as possible and all the necessary infrastructure for IT systems should be put in place to achieve this.
16All speed cameras should be operated by An Garda Síochána.
17A dedicated traffic corps within An Garda Síochána should be established at the earliest opportunity with a view to increasing the enforcement of road traffic regulations and reducing deaths and injuries on the roads.
18The Minister for Transport should publish a detailed set of proposals to deal with young driver licensing and training, so as to reduce the wholly unacceptable level of deaths and injuries among young drivers.
42Random breath tests for drink driving should be introduced.
43The National Council for Curriculum and Assessment should introduce road safety instruction to the second-level school curriculum as a matter of urgency.
44The Government should give priority to the speedy enactment of the Road Traffic Bill and the Driver, Testing and Standards Authority Bill.
54The Government should consider holding a Constitutional Referendum to permit random testing for substance abuse that may be impairing a driver’s ability to drive safely.
56An Inter-Ministerial Group should be established, comprising the Taoiseach and the Ministers for Health and Children; Transport; Justice, Equality and Law Reform; Education and Science; and Finance, to oversee radical changes in relation to road safety.
32There should be no production quotas established by any insurance company that might inhibit or prevent brokers from giving independent advice to their clients.
33A scheme for licensed brokers should be established by the Irish Financial Services Regulatory Authority that would permit any broker to deal, on behalf of clients, with any insurance company.
34Insurance companies should not discriminate against competing brokers in making available renewal information.
51IFSRA should make regulations to permit insurance brokers, subject to a competency test, to deal on behalf of their clients with any insurance company and the term ‘authorised adviser’ should be discontinued. Firms that presently call themselves ‘insurance brokers’ and who do not qualify under the competency test should be required to call themselves ‘Multi-Agency Intermediaries’.
2 The provisions of the Court Bill, 2001, in relation to the financial limits of the courts, should be brought into force, and the Courts Service should bring forward proposals to reform the courts as a matter of urgency.
3 The Government should negotiate a common European market protection for insurance policyholders against the insolvency of an insurer.
5 The Irish Financial Services Regulatory Authority should facilitate the placement of Irish motor insurance business outside the jurisdiction by amending existing regulations.
6 An arrangement should be entered into between insurance companies and hospitals that would refund hospitals for the cost of treating injured persons at normal health insurance rates but that would avoid the pursuit of individuals to make claims on insurance companies.
7 The Government should establish an expert group that would consider the information now published by the PIAB on the levels of awards in the Irish courts, the levels of UK awards and the levels of awards in other jurisdictions. This group would recommend a level of awards that would be appropriate to Ireland. The recommendations of the group should be published in draft form to allow all interested parties, including representatives of victims, to make submissions on the proposals.
13Legislation should be introduced to permit the keeping of central records on claimants by insurance companies, subject to appropriate safeguards.
24Where a policyholder objects to a settlement of a claim by an insurer, the insurer should not be able to settle the claim unless, having asked for an arbitrator to consider the issue, the arbitrator finds in favour of the insurer. The losing party should pay for the arbitration.
28All regulatory barriers or regulatory impositions on insurance companies that make entry to the Irish market (for Irish or other EU companies) more difficult than to any other EU country should be removed by the Irish Financial Services Regulatory Authority immediately.
30The Taxing Master should not be, nor have been, a member of the legal profession. The decisions of the Taxing Master should be subject to appeal to a lay appeals body.
31In-house barristers should have a right to appear in court in defence of claims against the insurance companies that employ them.
36An annual awards scheme should be introduced to recognise the companies that have had no accidents for several years and those that have made a significant effort to improve safety.
37The Health and Safety Authority and the insurance companies should specify appropriate health and safety standards with a view to offering premium reductions for companies that comply with such standards.
40Organisations, meeting certain financial criteria, should be able to self-insure for all motor risks.
45Insurance companies should provide significant incentives / penalties to young drivers between the ages of 17 and 25 to use governor or cruise control limits in cars.
55The National Council for Curriculum and Assessment should make early provision for the inclusion of the driver theory test for secondary school students as part of their Transition Year studies. In addition, secondary schools should be required to provide simulated driving instruction for all students on reaching 17 years.
58In order to encourage drivers to stay within the speed limits, all insurance companies should be required to offer significant discounts to drivers who voluntarily accept monitoring of their speeds; these discounts to vary depending on the perceived risk and to be substantial for young drivers.
4The 2 per cent levy, which is now merely a source of tax revenue, should be abolished.
57The proposed Road Safety Authority should be independent in the carrying out of its functions and should be adequately and jointly funded by the Exchequer and the insurance companies, to finance its activities.
22The Irish Financial Services Regulatory Authority, in the interests of transparency, should publish the justification given by insurance companies for changes in their premiums.
Recommendations in Final report
59. All imported vehicles should have the following fitted by 31 December 2008:
60. Insurance companies should:
1 Martin Brady T.D. replaced Conor Lenihan T.D. by Order of the Dáil on 16 November 2004.
2 Pat Breen T.D. replaced Gerard Murphy T.D. by Order of the Dáil on 20 October 2004.
3 Breeda Moynihan-Cronin T.D. replaced Kathleen Lynch T.D. by Order of the Dáil on 18 May 2006.
4 Ned O’Keeffe T.D. replaced Ollie Wilkinson T.D. by Order of the Dáil on 17 February 2005.
5 Ruairí Quinn T.D. replaced Brendan Howlin T.D. by Order of the Dáil on 18 May 2006.
6 Senator Joe O’Toole replaced Senator Shane Ross by Order of the Seanad on 6 July 2006.
1 Cost Benefit Parameters and Application Rules for Transport, Goodbody Economic Consultants, 2004
