By: Minister of State with responsibility for Financial Services, Credit Unions and Insurance; Sean Fleming
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MIBI Conference 2022 (Themes: Motor Insurance Issues, Uninsured Driving, Advancement of Automatic Number Plate Recognition/Motor Third Party Liability Database System and Claims Fraud)
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I would like to thank the Motor Insurers’ Bureau of Ireland for inviting me to speak today at its annual Conference. I am pleased to be here with other stakeholders including MIBI; member insurers; legal professionals; An Garda Siochána; and other experts. It is also important to note that MIBI provide an important role in protecting motor insurance policyholders, which enables a well-functioning motor insurance market.
As Minister of State in the Department of Finance with responsibility for insurance and financial services, I know too well the value of the insurance sector - a key pillar of the Irish economy. Ireland has a large and dynamic insurance sector by international standards – in 2020 Irish insurers wrote €81 billion worth of life and non-life premiums. The vast majority of this is international business with less than 30 per cent of business written by Irish insurers relates to the domestic market.
Domestically, the main insurance sectors are private motor with 2.2 million policies, and home insurance with 1.3 million policies. It is important to acknowledge the vast bulk of the domestic insurance market functions well for consumers, is a key contributor to the operation of the real economy, and employs 28,000 people in well paid jobs across all regions.
It is because of this industry’s key importance that Government has committed to the Action Plan for Insurance Reform, a whole-of-government initiative that aims to provide stability and certainty to the insurance market.
The Cabinet Committee Sub-Group on Insurance Reform, chaired by the Tánaiste, is overseeing the implementation of the Action Plan for Insurance Reform. The Sub-Group also includes the Ministers for Finance, Public Expenditure and Reform, Justice, and Children, Equality & Disability as well as relevant Ministers of State, including myself. This ambitious plan sets out 66 actions to help bring down the cost of insurance; introduce more competition into the market; prevent fraud, thus benefitting consumers.
A little over 18 months into this reform journey, I am pleased to inform you all that the Action Plan has delivered a number of key achievements, notably the new Personal Injuries Guidelines. Data indicating that the average award from the Personal Injuries Assessment Board (PIAB) is 42 per cent lower under the new Guidelines, including motor claims, has been warmly welcomed.
It is now necessary for insurers to pass on all savings from reforms to their hard-pressed customers, especially in light of the overall rise in living costs. I am currently meeting the main insurers in the market, and will be reiterating the need for premium reductions, in line with lower claims costs.
The National Claims Information Database, otherwise known as the NCID, has been a key policy initiative. The NCID is unique in Europe in terms of the transparency it brings to the insurance sector. I look forward to the forthcoming Private Motor Report, which should show initial data on the early impact of the Personal Injuries Guidelines.
In relation to motor insurance, another important milestone has been the Central Bank’s decision to ban price walking, which makes Ireland a leader in the EU when it comes to introducing policy for differential pricing. I welcome this move to end the “loyalty penalty”, which at its heart is about protecting consumers from unfair pricing practices.
Additionally, department officials and I have worked on the Insurance (Miscellaneous Provisions) Act 2022 which was implemented into Irish law in July. This Act aims to address several insurance-related issues set out in the Action Plan for Insurance Reform. Furthermore, it deals with specific consumer issues such as: price walking; claims-related disclosures; and further enhancements to the NCID.
Cabinet also recently approved proposals to overhaul the duty of care to address issues associated with ‘slips, trips and falls’, which predominate in high-risk/public-facing/footfall-heavy sectors. I am strongly hopeful that these developments will, by building upon the momentum of the insurance reform agenda, have further positive impacts on the insurance market.
Arising from the successful delivery of the government reform agenda, such as the implementation of the Personal Injuries Guidelines, the Office is now working with insurance brokers and IDA Ireland to help leverage the recent reforms. The IDA is currently engaged in a phased engagement process with targeted overseas insurance providers, some of whom I have met and others am due to in the weeks ahead, with a view to persuading them to enter the Irish insurance market
The insurance reform agenda will continue to deliver, and this includes other key upcoming measures such as strengthening the PIAB.
Notwithstanding that the majority of insurance claims are valid, it must be noted that these reforms are equally important in tackling fraud.
Highlighting the collaborative whole-of-government approach to insurance reform, the Department of Justice has enacted new legislation to strengthen the laws on perjury. The Criminal Justice (Perjury and Related Offences) Act 2021 places perjury on a criminal footing for the first time, making the offence easier to prosecute and provides a maximum penalty of up to €100,000 or 10 years' imprisonment. This represents a key element of the government’s work to address the issue of exaggerated claims and insurance fraud, again with the intention of positively contributing to reducing insurance costs.
While the legislative changes relating to perjury are perhaps the most prominent, there have also been additional changes in recent years to help tackle fraud and exaggerated claims. Since 2019, amendments to the Civil Liability and Courts Act 2004 have made it easier for businesses and insurers to challenge cases where fraud or exaggeration is suspected as it aligns the length of time a report of a claim can be made with the length of time a business can keep CCTV footage under the GDPR. These are in force and businesses should be aware of them.
Complementing the existing legislative provisions is the creation of the Insurance Fraud Coordination Office within the Garda Síochána. This Office is a specialised unit that will organise insurance fraud investigations, as well as offering support and guidance to the dedicated Garda fraud officers at Divisional level. All reports will be assessed and evaluated in a consistent, uniform manner, with one set of eyes reviewing them all, which is a significant change in approach. The Office should help with the assessment of these cases, providing more accurate figures, and improving standards of investigation. While it may take some time to see these effects, it is important nonetheless to take action now to tackle fraud and thereby reduce the impact on ordinary consumers.
Finally, it should also be noted that, by reducing the level of awards, the new Personal Injuries Guidelines should also reduce the incentive for insurance fraud.
We are starting to see the impact of the government’s insurance reform area in certain lines of business. There have been positive price dynamics in motor insurance premiums over the last number of months.
The latest CSO figures show that motor insurance is now ten per cent lower than this time last year. This decline in price has occurred despite the fact that inflation has risen. Furthermore, motor insurance premiums are 42 per cent lower than their peak in July 2016.
While these reductions are very much valued and to be welcomed, there is no room for complacency. It must be borne in mind, that motor insurance premium prices are declining, but from a very high peak. There must be a continued effort to increase affordability for policyholders, with the ongoing cost of living situation only serving to reinforce this issue.
A separate but related matter intrinsic to any discussion about the cost of insurance is uninsured driving. This is a problem that I as Minister of State for Insurance am acutely aware of. I have met the MIBI, An Garda Siochána and Minister Ryan on this topic on a number of occasions.
According to the latest MIBI estimates, 1 in every 13 vehicles is uninsured. This is not a victimless crime nor a cost-free activity. The costs of uninsured driving are ultimately borne by innocent parties. I am informed that insured motorists are paying the cost of this, equivalent to around €30-€35 to every premium sold. As such, reducing the level of uninsured driving could thereby act as another lever to help lower costs for policyholders.
As many here will know, efforts are currently underway to address this issue. Provisions in the Minister for Transport’s Road Traffic and Roads Bill 2021 will further support the operation of the Motor Third Party Liability Database, otherwise known as MTPL. Amongst other measures, the Bill will clarify issues of ownership of the database and data sharing, so as to comply with GDPR requirements. I am pleased to report that Bill is expected to pass through the Houses of the Oireachtas by the end of 2022.
I am aware that the MTPL database has been in the makings for quite some time. Therefore its imminent completion is to be welcomed. The database will be a vital resource in combatting uninsured driving therefore contributing to two key policy goals – improving road safety (as uninsured drivers are typically also guilty of a variety of other road traffic offences) and reducing the cost of insurance.
Notwithstanding that representatives from An Garda Síochána and Wills Towers Watson will set out to you all in greater detail the benefits of the MTPL database, I understand that that it will be integrated with the technology that the Gardaí use. Gardaí will now be able to scan number plates and check for details of insurance on the vehicle. On intercept, it will be possible to check whether the insurance policy in place covers the person actually driving. This is a substantial improvement and will no doubt assist with the Gardaí’s identification of uninsured drivers on our road.
I can report that it is now possible, as a result of this legislation, for the Minister of Transport by regulations, to facilitate the Motor Tax Office verifying valid insurance policies on private motor vehicles, before taxing the vehicle. However, before these changes could be implemented, extensive consultation with the Tax Office and local authorities would be required, as well as consideration of the large investment in I. T. infrastructure that would be necessary.
I thank all stakeholders for all the efforts to date to getting the databases up and running, and ask that you all continue to engage fully with MIBI, the Gardaí, the Department of Transport on ensuring that such information is available.
It is acknowledged that once the Bill is passed, the provisions will need to be commenced and the additional data, on driver numbers and fleets, will begin to be collected. However I would urge that in due course should the identification of uninsured drivers increase, policyholders begin to feel the benefit of reduced premiums.
In addition to the current work underway, I personally am of the view that we must continue efforts to discourage and combat uninsured driving.
Today, is an opportunity for us all to share potential opportunities we might have to further reduce the cost of insurance caused by uninsured drivers.
I understand that today you will also discuss the new rules that are just around the corner as a result of the EU’s 6th Revised Motor Insurance Directive. I welcome this discussion and appreciate the Council of Bureaux attending today’s conference to update us all on their work and insights on these forthcoming changes.
The Motor Insurance Directive is a key legal instrument of the Single Market, as it enables seamless crossing of internal borders of the European Union by EU residents with their vehicles for both business and leisure purposes.
It is proposed that the agreed revisions will
The Departments of Transport and Finance are both assessing the respective amendments, and considering how best to implement in Ireland before the Directive comes into effect in December 2023.
It is promising to see the experts who are at the front line of protecting policyholders coming together to provide feedback and share views on the revised MID.
This week is a busy week in the government’s calendar with the publication of Budget 2023. On the back of international developments, most notably the war in Ukraine, inflation is now projected to average 8.5 per cent this year and 7 per cent next year.
The Department of Finance has revised down its forecast for modified domestic demand next year by 2¾ percentage points to 1¼ per cent. It is for this reason that the government on Tuesday presented a “Cost of Living Budget”, focused on helping households and businesses in meeting these challenges. A package of supports amounting to some €11 billion was announced. €4.1 billion of this will be spent this year on one-off measures to address the inflationary pressures that households will face during the remainder of the year.
In addition, the government’s response has focused on the introduction of budgetary supports for businesses. That is why the government is putting in place the new Temporary Business Energy Support Scheme, to help businesses to get through this energy crisis.
The government’s approach is to implement a suite of policy measures while carefully managing the public finances to ensure we have sufficient reserves to respond to any further developments with the current cost of living pressures and to any new challenges that emerge in the future.
To conclude, as I mentioned at the outset, the insurance sector is a key pillar of the Irish economy and the motor insurance market functions extremely well for the majority of consumers. The current economic headwinds and inflationary pressures only serve to emphasise the need to work hand-in-hand to maintain and strengthen our financial services sector and to assist consumers in these difficult times.
It is very promising that today’s conference not only discusses imminent developments facing the industry such as the EU Motor Insurance Database, but also improvements that are taking place domestically to address challenges such as uninsured driving and fraud. These continuous enhancements will ensure that the motor insurance market operates in an efficient and effective manner for all.
Finally, the government remains committed to engaging on the Action Plan for Insurance Reform. There has been many successes so far, and an important aspect of all this has been the spirit of cooperation between the industry and government. Continuing this dialogue is extremely important. In this regard, I am meeting with the CEOs of the major insurance companies in the State and other stakeholders over the next few weeks. I will set out to them, as I have to you all today, that the government’s expectation is that the savings achieved by the reform agenda should be passed onto consumers.
I hope you all have a constructive discussions on these thought-provoking topics, and I wish you the very best.
Thank you.