‘Thrown to the wolves’ – Car insurance is out of control

Damning report on Car Insurance concludes drivers have been ‘thrown to wolves’, writes Geraldine Herbert

The lack of transparency from the insurance industry, cartel-like behaviour and anti-competitive practices within the sector are all contributing factors to the rising cost of motor insurance, according to a report published this week.

The Joint Committee on Finance, Public Expenditure and Reform found average premiums had increased by 37% in the past year and 68.7% since September 2013.

Some motorists had been hit with premium hikes in the order of 200-300%.

The cross-party committee, which is chaired by Fianna Fail TD John McGuinness, expressed “serious concerns” that consumers have effectively been told to accept these exorbitant increases without any explanation. It also criticised the role of the Central Bank which was accused of abrogating responsibility for protecting consumers, saying motorists had been “thrown to the wolves”.

The Insurance Industry

The insurance industry argues that it has been losing money on motor cover in Ireland for the past number of years and the current increases were an attempt to get premiums back to a profitable rate.

In addition, they maintain that the cost of claims including both individual awards and legal fees are driving up premiums. These arguments were rejected by the committee as no supporting evidence to verify their claims was supplied.

New laws forcing insurance companies to reveal details of claims, measures to crackdown on fraud and tougher penalties for drivers caught speeding are among some of the 71 key recommendations in the report.

Lack of Transparency

But it is the lack of transparency in revealing the cost of claims and the lack of data that is the core problem, according to the report.

The committee accused the insurance industry of hiding key information from customers; more than 70pc of claims cases are settled out of court by the insurers with no public visibility of the sums involved in the awards.

In the UK, annual statistics are published regarding the amount of money paid out by insurers, the number of and the average cost of claims settled for private car insurance and the length of time taken to settle them.

This information is essential to accurately determine why insurance costs are on the increase and to gain an insight on the factors impacting insurance premiums. To this end the report recommends that the Central Statistics Office be given a central role in collating and analysing insurance claims data.

Personal Injuries Assessment Board

The report also recommends strengthening the powers of the Personal Injuries Assessment Board (PIAB), the body originally established to reduce legal costs by keeping personal injury claims out of the courts.

It was designed as a lawyer-free zone, with legal fees not included in an award. But we have a situation where 90pc of claimants to the PIAB are now represented by lawyers and more often than not, the injuries board is being ignored in favour of the courts.

An expensive compensation system is also a key factor driving up the cost of insurance premiums with a considerable proportion of payouts in Ireland made for whiplash where on average the claimant will receive €15,000.

In the UK, the corresponding figure is €5,000. The report states that whiplash claims should be dealt with separately:

“The committee recommends that a special regime be put in place to deal with compensation claims arising from soft tissue and injuries,”

The motorist

For motorists however this is likely to be no quick fix to the rising costs of motor insurance.

The recommendations of the report aim to address the real reasons why premiums are rising at an unsustainable rate but the onus is now on the government to ensure they are implemented.

In the meantime premiums are rising every day and the motorist is likely to continue paying for the lack of regulation and shoddy trading standards of the insurance industry.

Geraldine Herbert

29th November, 2016

Author: Geraldine Herbert

Contributing Editor and Motoring Columnist for the Sunday Independent and editor of wheelsforwomen. Geraldine is also a regular contributor to Good Housekeeping (UK) and to RTÉ Radio One, Newstalk, TodayFM and BBC Radio. You can follow Geraldine on Twitter at @GerHerbert1

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