Hibernian is to increase its motor insurance discount for drivers without penalty points to 17.5 per cent, up from 10 per cent, from next November

Drivers with one to two points will also be rewarded for the first time with a 10 per cent discount on premiums.

Motorists with six points on their licence will continue to be charged an extra 10 per cent on the standard premium, with a further 5 per cent charge applied for each additional penalty point.

Hibernian said the move was in keeping with its strategy to encourage safe and responsible driving.

Mr Dick O'Driscoll, managing director of Hibernian General Insurance, said insurance companies had the opportunity to reinforce the initial success of the penalty-points system.

"We made a commitment to our customers that if the momentum created by the insurance reform agenda, spearheaded by the Motor Insurance Advisory Board, was maintained, then responsible customers would see this reflected in the cost of their motor insurance," he said.

To qualify for the discounts, drivers are required to give Hibernian the driver number on their licence. This number allows Hibernian to verify the penalty-points status of the licence using the National Driver File.

Customers yet to give Hibernian their number are being encouraged to do so in advance of their November renewal dates.

Hibernian is the only insurer to formally link premiums to the number of penalty points, first introducing the scheme in November last year.

However, all insurers will take into account either the number of points or the nature of the offences when weighing up the risks posed by drivers.

Almost all have indicated that they intend to keep their policies on penalty points under review.

It is understood that some insurers believe a driver with a handful of points is safer than a driver with none. This theory stems from studies in the UK showing that drivers who incur points change their behaviour and drive more carefully.

In common with a number of other insurers, Hibernian will not quote new customers with five or more points.

Mr Michael Kemp, chief executive of the Irish Insurance Federation (IIF), has said it had not encountered any problems regarding drivers with points being unable to secure cover.

Drivers refused quotes from three insurers are entitled to go to the Declined Cases Committee operated by the IIF, who will then source a quote on their behalf.

Only around 400 cases were referred to the committee in 2003 out of more than a million motor insurance policies, Mr Kemp said.