The Great Motor Insurance “Stick ‘em up”

By Cian O'Carroll, Monday, 22nd August 2016 | 0 comments
Filed under: Personal Injuries, Road Traffic Accidents.

Over the last 3 years, the cost of motor insurance has doubled. In the last year alone, the CSO reports that premiums have gone up by 35.5%. Despite this monstrous hike, there is no regulator in place to question these spiraling costs to consumers while the Government continues to ignore the problem.


Motor insurance is not like other types of insurance because it is compulsory. If the insurance industry raised the premium to €5,000, we would either have to pay it or park up our vehicle. To drive without insurance is a crime, punishable by disqualification and even imprisonment.


I have no difficulty with motor insurance being compulsory, but with that artificial ‘sellers market’ ought to come strict regulation of the type we see with the power and telecoms industries. If your gas or electricity supplier wants to increase the cost of their product, they must apply to the Energy Regulator, make a case for the increase and be quizzed on the need for the rise. In the motor insurance industry, the companies – with remarkable unison – increase their premiums and only have to issue press releases claiming they need to hike prices in order to be profitable. There are no questions, no investigation, just the familiar sense of the helpless consumer being squeezed.


Insurers say that they are losing money – or not making as much as they would like – because there was a price war back around 2010, premiums were driven downwards while at the same time the courts increased the average compensation they were paying to injured persons. Without a regulator to investigate these PR claims however, they are meaningless. Insurers don’t make their all profit directly from premiums. They can make large profits from investing the premiums and cash reserves while their books will still show a net underwriting loss (the difference between the premiums they take in and the compensation and compensation costs they pay out).


In the wake of the 9/11 attacks, there was a similar wave of rate hikes by these global insurers operating in Ireland. They claimed that injured people were being over-compensated in our courts system and so year after year, they imposed savage premium hikes. Businesses folded, people were squeezed and in the end, the Government gave them what they wanted – the Personal Injuries Assessment Board (PIAB) and a raft of new laws that sought to criminalise perfectly innocent victims of accidents. The promise was that with these new ‘reforms’, premiums would come down. They didn’t – at least not significantly – until competition increased towards the end of that decade.


We are now seeing exactly the same happening now and we will see it happened again and again in the future unless and until our Government levels the playing field for consumers by imposing a strong Motor Insurance Regulator to control pricing.


Returning to the motor insurers and their explanations for the ongoing premium hikes, it is unsurprising that none of their reasons include poor management or business ineptitude on their part. No, instead they blame the courts, they blame lawyers and they blame injured persons. The core of their reasoning is that about 80% of people injured in road traffic collisions suffer whiplash type injuries and in Ireland, our courts are just too generous to those types of injury. They say that while in Ireland the average whiplash payment is in the order of €15,000, it would be closer to £5,000 in the UK and even less in countries like Spain. They also complain that legal fees are too high and the number of road traffic claims are rising.


There is nothing new in these arguments. They were all trotted out in the 2001/2002 period when we last got squeezed by ‘Big Insurance’. Taking them in turn, I agree that you can find countries where personal injury compensation is very low, but Ireland is pretty average. Just looking at our European neighbours, we are roughly comparable to compensation paid in Germany and below that paid in France. In serous injury cases, the UK has significantly higher levels of compensation than for similar cases in Ireland while yes, Italy and Spain have markedly lower levels of compensation, even in very serious injury cases, but that is because they provide for the future care element outside of the insurance claim.


Furthermore, there isn’t an experienced practitioner in the county who would deny that since 2014, there has been a dramatic reduction in the levels of compensation being paid by the High Court following a line of decisions from the new Court of Appeal. The upward trend in compensation for whiplash type injures has very definitely turned, yet to listen to ‘Big Insurance’ you would think the opposite. Of course they usually quote 2-year-old statistics that bolster their argument. A strong regulator wouldn’t be fooled by that 3-card-trick.


Then on the issue of costs, again these have been falling, falling, falling over the last 10 to 15 years. That is why they don’t say any more than that costs are ‘too high’. Every single year, average costs per €1,000 of compensation paid is falling and my legal practice, resisting the easy option of charging our clients, has to work hard to increase efficiency.


Finally there is the claim that rising numbers of claims – the so-called ‘claims culture’ is forcing premium hikes. I am not in the habit of falling back on the PIAB for support but just last month, their chief executive Conor O’Brien put that one to bed saying the rise in claims at 6% was “modest” and was in line with the increase in economic activity. In other words, as Ireland gets back to work after the collapse, there are more cars and vans on the road and more accidents will occur.


As the motor insurance industry tightens its stranglehold and forces further concessions from our Government – as it surely will – we need to ensure that this time we impose on them a strong regulator who will protect us when ‘Big Insurance’ comes back for more of your money.


Cian O’Carroll Solicitors, A Medical Negligence & Personal Injury Law Firm. FREEPHONE 1-800 60 70 80 | WWW.TIPPLAW.COM

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