Motorists are likely to face further increases in premiums after the Government approved the drafting of legislation reforming the State’s insurance compensation fund.
The main thrust of the Insurance (Amendment) Bill 2017 will be to increase the level of cover to consumers of insolvent insurance companies to 100 per cent from the current level of 65 per cent.
The expanded fund will be funded by industry with the heads of Bill providing for motor insurers operating in the Irish market to contribute 2 per cent of gross written motor premiums to create a fund to meet part of the cost of any future liquidation of insurers operating in the Irish motor market.
The cost is likely to be passed on to motorists in the form of higher motor premiums.
The legislation follows a Supreme Court ruling in May that ruled the 1,750 claimants of Malta-registered Setanta Insurance should be compensated out of the State’s Insurance Compensation Fund following the company’s collapse in 2014. An earlier court ruling had found that the Motor Insurers Bureau of Ireland was liable to meet the claims.
Outstanding claims
The issue of compensation arose after the company’s liquidation failed to meet the cost of outstanding claims.
The Bill will also transfer administration of the fund from the Accountant of the Courts of Justice to the Central Bank, as well as giving the State Claims Agency a more formal role in the event of a failure of an insurance company.
Welcoming the new legislation, Minister for Finance Paschal Donohoe said: “The failure of Setanta and the uncertainty that followed over the compensation arrangements for claimants highlighted weaknesses with the current insurance compensation framework. These have been recognised in the Review of the Framework for Motor Insurance Compensation in Ireland Report – which was endorsed by Government last year.
“The Bill will implement the recommendations of the report and thereby provide greater certainty for both consumers and industry, regarding the insurance compensation framework in Ireland.”
