Insurance firms have been accused of engaging in a “major campaign of spin” as new figures cast doubt over their position that the increasing cost of claims is to blame for a rise in motor premiums.
Insurance Ireland, the industry’s representative body, yesterday revealed that it had paid out €1.26 billion in settlement of motor insurance claims last year.
This is a 27 per cent increase on the total amount paid out in 2013. Motor premiums have risen by 70 per cent in the past two years.
Kevin Thompson, chief executive of Insurance Ireland, insisted yesterday that sharp increases in motor insurance costs were being driven by “the extreme volatility in the claims and compensation environment and the associated legal costs”.
He told a special hearing of the joint Oireachtas committee that the situation had been further compounded by changes in court payout limits in 2014.
“Put simply, there are more insurance claims and they are costing more,” Mr Thompson said.
He admitted that underpricing caused by too much competition in the Irish market and poor investment returns had also contributed to significant hikes in premiums.
TDs and senators widely criticised Insurance Ireland for its failure to provide raw data on claims that were settled without going to court.
Gerry Horkan, a Fianna Fail senator, said that the sector had provided no visibility about the level of payouts.
He said publicly available information on settlements reached by the Injuries Board, a state claims agency, and the courts showed compensation levels had remained relatively stable over recent years and provided no basis for recent price hikes.
Seán Sherlock, a Labour TD, said that Insurance Ireland had made no real, honest effort “besides very aspirational language” to provide data that would justify the increases.
Rose Conway-Walsh, a Sinn Fein senator, said that the most volatility in recent years had been in the international bond market and suggested Irish motorists were bailing out the industry for bad investment decisions.
John McGuinness, the committee chairman, criticised the Competition and Consumer Protection Commission (CCPC), claiming that it failed to take proactive measures to ensure greater transparency and disclosure of data in the insurance sector.
Mr McGuinness pointed out that a 2005 report by the CCPC’s predecessor, the Competition Authority, had recommended greater disclosure of risk-related data, as a lack of such information acted as a barrier to new entrants to the market.
Karen O’Leary, a member of the CCPC, admitted that the recommendation had not been acted upon and that there was currently no law that required insurance firms to publish data on claims and settlements.
Asked if this was anti-competitive, Patrick Kenny, another CCPC commissioner, replied: “It could be seen as a breach of competition law.”
Mr Kenny defended the CCPC not taking action on the issue, claiming it had received no complaint from any party that they had been unable to gain access to the data.
“I don’t think you should be waiting for a phone call,” Mr McGuinness retorted.
The CCPC said that it had received 227 complaints from members of the public about rising motor insurance costs in the past 12 months, which it described as unusual.
Earlier this week the commission announced it had launched a formal investigation into suspected breaches of competition law by motor insurance firms relating to public announcements of expected price rises. It said it had already raised the issue of “price signalling” with Insurance Ireland last October.
“Statements signalling future pricing intentions may result in a degree of unspoken co-ordination which may breach competition law,” Ms O’Leary said.
She admitted that the CCPC was very concerned about insurance firms signalling further price increases in recent weeks.
“It is clear to us that there is a significant issue of transparency, disclosure and confidence in the sector,” she told the committee.
Dorothea Dowling, an insurance industry expert, expressed concern that insurers were being allowed to dictate the reform agenda without using any empirical evidence to support their arguments.
“The available data actually points in a different direction,” Ms Dowling said.