I would like to start by thanking Aidan Flynn and the Freight Transport Association of Ireland for inviting me here this morning, and for giving me this opportunity to address the Transport Ireland Manager conference for 2017.
I would also like to acknowledge the work undertaken by FTA Ireland in producing the Motor Insurance Survey Report, which is a great piece of work.
What I would like to do in my address this morning, if I may, is to talk about what the Government has been doing to tackle the rising cost of motor insurance in this country.
The recent rise in the cost of motor insurance is a critical issue, which has had a significant impact on society as a whole.
Throughout the country people have been paying significantly higher premiums for insuring their motor vehicles, and many are struggling to afford what is, after all, an essential requirement for day-to-day living.
However, such increases obviously have a disproportionately large effect on those engaged in economic activities which involve people driving for a living, such as in the freight transport sector.
With the triggering of Article 50 and the commencement of the Brexit negotiations, the freight sector is facing uncertain times.
It is now more important than ever for companies to take steps to minimise the risks that they face, to ensure they remain competitive in a challenging environment.
It was against the backdrop of increasing premiums, that the Cost of Insurance Working Group was established by the Minister for Finance.
The Working Group, which I chair, has been tasked with examining the factors contributing to the increasing cost of insurance and identifying what measures can be introduced to help reduce this cost,
Taking account of the need to ensure a financially stable & attractive insurance sector.
The initial focus of the Working Group was on the issue of rising motor insurance premiums and consultation with relevant stakeholders was a key part of this process.
The result of that examination was the publication of the Report on the Cost of Motor Insurance on 10th January 2017
- which focuses on 6 priority areas,
- making 33 recommendations
- and detailing 71 individual action points: with timelines & designating the people responsible for taking those actions within those timelines
I acknowledge the FTA Ireland contention, as stated in its Motor Insurance Survey Report, that private motor insurance and commercial fleet insurance are different types of insurance, but that doesn’t mean they need necessarily be examined separately.
FTA Ireland was one of the bodies consulted by the Cost of Insurance Working Group, as was the Irish Road Haulage Association, and in my view many of the recommendations when fully implemented will benefit your sector, and should lead to greater stability in the pricing of motor insurance and help prevent the volatility that we have seen in the market in the past.
It should also better facilitate potential new entrants to the market to cater for both private and commercial insurance.
Taken together, these should help in addressing many of the issues which arise in the freight transport sector.
There are of course concerns and risks specific to the freight transportation sector, and I am happy to take on board your perspective on these matters.
- Improving Data Availability - Claims
One of the key findings of the Working Group Report is the need to enhance transparency and facilitate the use of data sharing and collection - across industry and publicly – to the level that we see in other jurisdictions.
This was a common theme which arose in discussions with a wide range of stakeholders and is a matter which needs to be addressed.
Currently in Ireland, claims data related to motor insurance is available from a variety of sources.
However, no organisation is currently responsible for the collection of data from insurers for the purpose of improving transparency on emerging risks within the market, thus representing a clear information gap.
Not just for consumers but also for potential new entrants.
Pricing of insurance premiums reflects a current view on the likelihood and cost of claims into the future.
Transparency of claims data could feed into insurers’ current view of future risks, therefore improving their ability to price more accurately and reducing the cyclicality of their pricing.
The Working Group has developed a phased approach to progress this matter. In the short-term, it recommends commencing the publication, on a quarterly basis, of a number of key aggregated claims-related metrics to be provided by the insurance sector.
The metrics will then be published for the first time in the second quarter of this year.
This publication of initial metrics will act as a stepping stone to the establishment of a National Claims Information Database by the middle of 2018.
The National Claims Information Database will provide data on
- what claims are being made against property or for personal injuries,
- the legal and other costs that are being incurred,
- the channel of resolution
- what impact that has on the final settlement,
- amongst other things.
It should assist in identifying emerging risks in the market, for example in relation to claims, trends and costs.
The information will be collected and stored at an aggregate level and will in my view be equally as useful for the commercial insurance sector as for the private insurance sector.
The Central Bank will hold this database.
- Improving Data Availability - Uninsured Driving
The second area where data availability is a live issue is in the field of uninsured driving.
Figures from the Motor Insurers’ Bureau of Ireland (MIBI) show that the level of uninsured driving in Ireland rose from less than 5% in 2013 to 7.1% in 2015. MIBI pays out approximately €50-60 million annually to meet the claims of those who have been in a collision involving an uninsured or untraceable driver.
This cost is passed directly onto motorists.
To tackle this issue, the Working Group has recommended the establishment of a database to identify uninsured drivers, to enable Gardaí to check motor insurance compliance effectively.
The ultimate aim is to provide An Garda Síochána with a mobile app, on an ‘authorised user’ basis, to allow for roadside access to the database.
The Report sets a deadline of Q3 of this year for the database to go live in relation to privately owned vehicles.
Data in relation to commercial vehicles will be added in during a later phase of the project.
Specific actions are being taken in regard to fleet vehicles.
Led by the Department of Transport, a protocol is being developed with the insurance industry to get fleet managers to update the information on the National Fleet Database.
Under the protocol, fleet managers will be advised by insurance companies that a vehicle is not covered by the fleet policy if it is not entered onto the National Fleet Database.
This will provide for accurate, up-to-date information for fleet vehicles, which account for 10% of all vehicles insured by the Irish motor insurance industry.
Fraud, like uninsured driving, has been highlighted as an area where the availability of more quality information can lead to a reduction in the cost of premiums.
While the vast majority of claims are genuine, there is a perception out there that insurance fraud is a victimless crime.
However, nothing could be further from the truth and such claims, whether of an opportunistic and exaggerated nature - or through highly organised crime rings, need to be made as difficult as possible to get away with.
In this regard, the insurance industry has estimated that fraud costs it in the region of €200m each year, adding approximately €50 to each premium.
To deal with this problem, we are establishing a fully functioning integrated insurance fraud database for industry to detect patterns of fraud, by the end of next year.
- It is likely to be modelled on an equivalent UK system,
- and will be funded by industry
- but managed by an independent not-for-profit body.
This will be progressed in tandem with actions to ensure any data protection issues are appropriately addressed.
- The Personal Injuries Commission
Another core action we have taken is the establishment of a Personal Injuries Commission to investigate and make recommendations on processes in other jurisdictions which could enhance the claims process in Ireland.
We have to move away from being outliers when it comes to large awards for minor injuries.
The terms of reference for that Commission are set out in the Report and they include:
- the commissioning of medical research,
- benchmarking of international awards for personal injury cases,
- analysing and reporting on international compensation levels and compensation mechanisms.
- reporting on systems where detailed grading of minor personal injuries is in operation.
The need to begin this work immediately has been recognised by Government and on 10th January, the former President of the High Court, Mr Justice Nicholas Kearns was appointed as chairperson of that Commission.
The other members are representatives from stakeholders that include the medical, legal and insurance sectors as well as relevant Government Departments and Agencies.
The work of the Commission has commenced with a first report due later this year.
- Other measures
While the above measures could be seen as the key priorities, the report should very much be seen as a package of reforms, which when implemented together should provide for greater stability in the pricing of motor insurance and should help to prevent the volatility that we have seen in the market in recent times.
- In this regard, another bundle of measures addresses the issue of protecting the consumer through, for example, the extension of the current renewal notification timeframe by five working days.
- Additionally, the Department of Finance is working with Insurance Ireland on the development of a protocol to require insurers to set out reasons for large increases in premiums.
This recommendation is of relevance to the FTA’s conclusion and recommendation to “understand why there are premium increase shocks”.
While the Working Group recommendation refers to consumers, its implementation will be of equal value to the commercial insurance sector.
- The Department of Finance is also currently working with Insurance Ireland in relation to the development of a protocol which will provide for more transparency in claims handling, which the FTA has called for in their Motor Insurance Survey Report.
The aim of the protocol is to ensure that relevant policyholders are informed that a claim against them has been made, as soon as possible after being lodged.
The protocol will also require insurers to consider the policyholder’s perspective and inform them before a claim is settled.
- Another part of the recommendations centres on reducing costs in the claims process, in tandem with the work of the Personal Injuries Commission.
These actions will seek to maximise the usefulness of the Personal Injuries Assessment Board and to improve the Book of Quantum.Further reviews will also take place to examine the impact of:
- the changes in the court jurisdictional limits,
- the setting of the discount rate in PI lump sum awards, and
- the introduction of periodic payment orders.
The implementation of the recommendations of the Review of the Motor Insurance Compensation Framework is also ongoing as we speak.
This will provide clarity on the respective roles of the Insurance Compensation Framework and MIBI’s role in the event of the future collapse of motor insurance firms selling in Ireland.
It is expected that a legislative proposal on this will be brought to Government for approval in the coming months.
Actions have also been recommended to develop a protocol requiring insurers to seek proof of NCT or National Certificate of Roadworthiness, and to promote compliance with road safety legislation.
Insurance Ireland will also present the Working Group with a report on the use of telematics in Ireland by the end of the year.
Awards & standards
In addition to the work being undertaken by the members of the Cost of Insurance Working Group and the insurance industry, there is also a role for the freight transport sector to play.
Having an effective risk management process in place allows companies to demonstrate to their insurer the steps that they are taking to minimise and mitigate the risk that the industry faces.
To assist in this process, FTA Ireland has launched their accreditation scheme to improve compliance levels and the professionalism of the industry.
I would like to congratulate all of those receiving their Gold and Silver FTA Accreditation awards here today,
who have proven that they have in place systems to manage risks such as roadworthiness and driver competence.
It is essential that the industry continues to drive high standards.
This will hopefully lead to a reduction in premiums for the freight industry and I am encouraging the insurance industry to take note of the work being done by the freight industry in this regard.
I would like to conclude by saying that I very much appreciate being given the opportunity to address this event and I look forward to receiving your continued feedback and ideas in respect of motor insurance costs.
A great deal of work has already been done in implementing the recommendations in the Report on the Cost of Motor Insurance.
Ongoing progress can be followed through the quarterly updates which will be published on the Department of Finance website from the second quarter of this year.
We’ve recently published a preliminary quarterly report for the Oireachtas Committee.
I wish to acknowledge again that there are issues specific to the commercial fleet insurance area.
I certainly recognise that there is no policy or legislative “silver bullet” to immediately address the problem of across-the-board rapidly rising motor insurance premiums.
However, I believe that – with the cooperation and commitment of all parties, but particularly the insurance industry – completing all the actions outlined on time will lead to a stable and accessible insurance market delivering fairer premiums for commercial fleet operators, and all consumers.
The very best of luck with all of your work in the Association and congratulations again to award winners.