The Motor Insurance Advisory Board report published yesterday affords an unprecedented insight into why motor insurance costs in this State are among the highest in Europe. The reasons are to some extent obvious, which in turn makes all the more inexplicable the failure of this Government and its predecessors to address them.
It comes as no surprise to hear that a combination of high legal costs and a lack of competition in the insurance market has pushed up premiums year after year. What the MIAB has done is produce hard evidence of what many have long suspected. This includes a system were legal fees are based on the compensation payments and average 39.5 per cent of the sum awarded. In smaller cases fees can regularly exceed the compensation payment. The MIAB has also exposed an insurance industry that is 10 times more profitable in absolute terms than its larger counterpart in the UK. Yet insurance companies are not prepared to fight many small claims because of the legal costs. They prefer to settle and pass the cost onto their helpless customers. Not surprisingly the Incorporated Law Society and the Irish Insurance Federation wasted no time casting each other's members as the true villain of the piece.
The MIAB report and 67 recommendations is an instruction manual for any government that wants to tackle the high cost of motor insurance. But no meaningful progress can be made without taking on both the legal profession and the insurance industry. The MIAB has called for wide ranging reform of the way legal fees are set and tough regulation of the industry by the soon to be established Irish Financial Services Regulatory Authority. In effect, the MIAB wants to see an end to self regulation. They are unlikely to achieve this without a fight
The outgoing Fianna Fail led administration claims this is a challenge they want to take on. The all but obligatory implementation group that follows a report of this nature has already been established. But there was the usual dissembling yesterday when it came to the two issues that the MIAB said should be addressed immediately: scrapping planned increases in maximum Circuit Court awards and fast-tracking of the promised Personal Injuries Assessment Board. In is hard to see the implementation group achieving much this side of the election. In the meantime, its existence will provide the Government with a fig leaf for use at the hustings.