Motor Insurance Industry Under Fire
The motor industry and Central Bank are being accused of throwing Irish consumers to the wolves over the massive costs of car insurance in this country.
Insurance premiums are spiralling out of control and an Oireachtas committee has been warned that the rapidly rising premiums are unlikely to be reversed any time soon.
The Joint Committee on Finance, in a hard-hitting report, has said that the motor industry had deliberately been hiding key information from the public and have actually been engaging in cartel-like behaviour.
The cost of motor insurance has seen some people’s premiums go up by over 100 per cent in just two years.
In the report has shown that all witnesses who appeared before the committee, except for the insurance industry itself, had highlighted the absence of data-sharing and the complete absence of any sort of transparency across the entire sector.
The absence of this vital information meant it was not possible to get to the root cause of the problem and the real reason why there has been such a massive hike in motor insurance prices in recent times.
The report pointed out that 20 per cent of insurance claims are being processed through the Personal Injuries Assessment Board (PIAB) and a further 10 per cent are processed through the courts.
The report said,“For both of those routes there is full transparency . . . however the remaining 70 per cent of claims are settled privately by insurers [and] there is no visibility or transparency whatsoever about these claims,”
The Joint Committee on Finance said consumers have “effectively been told to accept these exorbitant increases without any explanation. The insurance industry says that it is the result of an increase in legal costs and compensation awards but will not supply supporting evidence for verification.”
So the motor insurance industry is blaming the legal system for the rising costs but they have failed to give any evidence of this.
The lack of data-sharing and the lack of transparency within the entire industry has had a negative impact on competition, therefore, “new entrants are reluctant to enter the Irish market because they don’t have the requisite information to carry out due diligence”.
Another reason given for the exorbitant rise in motor insurance premiums is that insurance companies have been using their motor insurance books to bolster shortfalls in investment income in other areas.
The report found that between 2012 and 2013 investment income to the insurance industry dried up dramatically. Before this, the Insurance companies were guaranteed returns of 4 per cent on Irish government bonds. Insurance companies rushed to plug gaping holes by burning through their capital reserves.
So which is it? The massive costs in motor insurance premiums are due to huge legal costs? Or that the insurance companies have gambled on investments and due to their losses have decided to eat into their capital reserves and then passed the buck on to the consumer? Is it both, or are there more skeletons in the closet yet to be revealed to the public?
Whatever the answer, Irish consumers are literally being taken for a ride by the insurance companies. What everybody wants to know is, when will the insurance premiums come down? We suspect, not any time soon.