My motor insurance premium is up by €200 since last I renewed. Maybe I had it coming to me, writes Donal O’Keeffe.
When it comes to motoring, I’m something of a monster. I have a string of convictions for dangerous driving and – if I’m honest – I’m actually writing this column on my laptop, which is on my lap, as I drive at high speed in a bus-lane. Penalty points? I have ALL the penalty points.
Then there was that drink driving conviction where the Guards said I was so drunk that I got hopelessly tangled-up in the safety-belt (hey, credit for wearing a safety belt!) and I passed out when they asked me to blow into the breathalyzer.
I work as a nuclear physicist and I regularly use my car to transport dangerous radioactive waste. The car is a pimped-up top-of-the-range boy-racer speed-wagon and I myself am a nineteen-year-old male whose head is a confused soup of hormones and aggression.
Oh hang on. Wait. None of that is actually true. I made it all up.
Since last I renewed my insurance, I haven’t had any road traffic accidents, I haven’t been arrested for anything and I haven’t picked up any penalty points. I am still in my forties and I haven’t changed the car’s usage. Also, my sixteen-year-old car is now worth considerably less than the insurance disc I am legally-obliged to display on the windscreen.
But somehow my insurance is up two hundred quid since this time last year.
(And it had already taken a pretty steep rise this time last year too, going up about a hundred notes even after I rang my broker and got them to cut my cover to the bone. And – just to be clear – I hadn’t done anything Jason Bourne-ish with my car then, either.)
According to figures released by the CSO, I’m not alone. Irish motorists have been hit by insurance hikes of an average of 38.3% in the past year and of more than 60% since the start of 2014.
Paul Kavanagh, Group Managing Director of the brokerage McCarthy Insurance Group, points out that while those CSO figures are averages, some people have in fact been hit by increases of up to 100%.
I asked the consumer journalist Sinead Ryan what is causing these massive hikes.
The number one reason, she says, is claims. “We have higher and more frequent claims than our EU counterparts. 70% of these are settled privately by insurers (many they choose not to fight to save on legal costs, so it’s dubious whether they are valid claims).
“Our court pay-outs are higher than most countries. Average whiplash claim here is €15,000; in UK it’s £5,000, in Spain €2,000.” Pay-outs are arbitrary, Ryan says, as judges don’t have to abide by the Book of Quantum, which outlines the ‘value’ of all injuries, from sprained wrist to permanent brain damage. The Book of Quantum hasn’t been updated in 10 years and is currently under review.
Paul Kavanagh places a lot of blame at the door of ‘Direct’ insurers, which in recent years went after market share by under-pricing. “Every second advert on the TV was for Go Direct for Motor Insurance – €269, €259, €239, €219 and €199 – How low could they go? They created a frenzy of price-cutting across the entire industry, resulting in many being unable to pay the claims that followed.
“You could get motor insurance for less than the cost of replacing your windscreen. It was completely unsustainable and now we’re all paying. In fact, we’ll all be paying for our last great ‘Saviour’ – Sean Quinn – until 2038. 2% of every premium goes to paying for his mess. On top of that, another 3% goes directly to the Government.” Kavanagh is referring to the levy originally imposed on insurers to bail out PMPA. That was paid off fifteen years ago but the levy remains because successive governments liked the steady stream of cash.
Fraud accounts for about €50 on every policy. Another €50 goes toward paying for Setanta, a Maltese based insurer, which went bust with €90m (and rising) owing in claims. A high court decision has put the onus on the Motor Insurance Bureau of Ireland (in effect, all Irish insurers) to pick up the tab. Sinead Ryan likens this to ‘making Dunnes pay for Tesco’s losses’.
Ryan offers another reason for sky-rocketing premiums: “The crazy EU directive on gender introduced in 2012 (which) means women and men pay the same. This is despite decades of evidence showing women have far fewer and lower claims. Actuaries counteracted by putting up all premiums to compensate for this political decision.”
Finance Minister Michael Noonan has ‘buried his head in the sand’ over insurance, Kavanagh says. “All we’ve got from Government has been a complete Pontius Pilate act. Anyway, the PMPA 3% has brought over a billion into State coffers in the past fifteen years. Why would he be bothered, seems to be the attitude.”
Sinead Ryan agrees. “The Government really doesn’t have the will to do anything,” she says. “It could, if it wished, set up an insurance company, like the VHI, and sell on its own terms.”
To top all of this off, Kavanagh says the Central Bank is now telling insurers to beef up their reserves as ‘there could well be’ another collapse or another withdrawal of one insurer or more. “The body language coming from Ireland is sending a shiver down the backs of foreign investors, who now see the Irish market as a basket case.”
All of that said, though, what about me and my poor sixteen-year-old car?
“The age of your car is your biggest problem,” Paul Kavanagh tells me bluntly. “The top insurers – mainly European but domiciled in Ireland – don’t want your car. And where they are stuck with you, they just put in unjustified increases.
“We no longer have rate books,” he says of brokers. “We can no longer say a premium is correct or fair. The computer says ‘X’ and that is that.”
I can’t afford a newer car, so I’m banjaxed. I have no choice but to pay up (even though I can’t particularly afford that either).
I have no choice. And – with average premiums up by nearly 40% – I’m not alone. Unless the weakest government in the history of the State actually does something to address our spiralling insurance premiums, chances are you won’t have any choice either.