Minister, thank you for taking the time out of your busy schedule to talk to Irish Broker. Can you tell our readers briefly about your political background?
Well I’m Fine Gael, but I wasn’t born that way. I only decided to get involved in politics when I was 26. I was living and working in Vienna and was thinking of coming home and getting involved – this was 2008 and things weren’t looking so good for the country. I joined FG because I saw it as the party of reform and as a responsible party with exciting young leaders, which is what I thought our politics needed. In 2009 I was elected to Dublin City Council and then I was elected to the Dail in 2011. In my first term I served on the PAC and then the Banking Inquiry, as well as doing a lot of work on political reform. After the election in 2016, and playing a role in the government formation talks I was appointed as Minister of State.
How important is insurance in your overall ministerial brief?
It’s very important – I have a lot of responsibilities but this piece and Brexit really dominate my time, as they should. It was clear to me at the very start when Michael Noonan asked me to take on the responsibility for reforming the insurance sector that I would need to dedicate a lot of time to it. The Taoiseach has also taken a significant interest. It’s easy to know your priorities when your boss and your boss’s boss start asking questions about what you’re doing.
In light of the likely fall-out from Brexit, are you concerned about over regulation in this country? AIG and Lloyds have already overlooked us in favour of Luxembourg and Brussels. Have you concerns in this area?
I look at all this from a background of examining our financial and banking crash, where financial firms were not appropriately regulated. So no, I do not have any particular concerns on the issue of over regulation here, given the lessons we learned and the new rules in place. We work to common standards now. The Central
Minister, thank you for taking the time out of your busy schedule to talk to Irish Broker. Can you tell our readers briefly about your political background?
Well I’m Fine Gael, but I wasn’t born that way. I only decided to get involved in politics when I was 26. I was living and working in Vienna and was thinking of coming home and getting involved – this was 2008 and things weren’t looking so good for the country. I joined FG because I saw it as the party of reform and as a responsible party with exciting young leaders, which is what I thought our politics needed. In 2009 I was elected to Dublin City Council and then I was elected to the Dail in 2011. In my first term I served on the PAC and then the Banking Inquiry, as well as doing a lot of work on political reform. After the election in 2016, and playing a role in the government formation talks I was appointed as Minister of State.
How important is insurance in your overall ministerial brief?
It’s very important – I have a lot of responsibilities but this piece and Brexit really dominate my time, as they should. It was clear to me at the very start when Michael Noonan asked me to take on the responsibility for reforming the insurance sector that I would need to dedicate a lot of time to it. The Taoiseach has also taken a significant interest. It’s easy to know your priorities when your boss and your boss’s boss start asking questions about what you’re doing.
In light of the likely fall-out from Brexit, are you concerned about over regulation in this country? AIG and Lloyds have already overlooked us in favour of Luxembourg and Brussels. Have you concerns in this area?
I look at all this from a background of examining our financial and banking crash, where financial firms were not appropriately regulated. So no, I do not have any particular concerns on the issue of over regulation here, given the lessons we learned and the new rules in place. We work to common standards now. The Central
“The Department of Jobs, Enterprise and Innovation, in conjunction with the Personal Injuries Assessment Board (PIAB) and the Department of Justice, will also continue to oversee a range of improvements to the PIAB process and the Book of Quantum. These will include improving engagement with the PIAB process and introducing more granularity into the Book of Quantum, together with its more frequent publication”
And that’s not necessarily a bad thing either. Limited discretion is sometimes provided in the transposition of Directives and in these instances, the Department of Finance generally does a public consultation.
Can you give our readers a progress up-date on the Cost of Insurance Working Group’s Report? When do you anticipate the timing of the implementation to the reforms? How soon can we expect activity on this report which is crucial to our industry?
First of all, activity is already well underway. And the timeline for each measure has been set out and published together with the body or agency responsible. It’s important to be very transparent about what we aim to achieve and how and when, so people can hold the government to account on this. I had no interest in publishing a report that might sit on a shelf – that’s why we’ve set out this detailed action plan as a roadmap to achieving those five or six strategic goals that we have.
On 10 January 2017 the Report on the Cost of Motor Insurance was published (and which is available on the Department of Finance website), and since then the Cost of Insurance Working Group has been busy monitoring activity. A few weeks ago I gave a preliminary report to the Oireachtas Committee on work underway and we will follow with regular quarterly reporting from May.
To provide a quick update on a number of the recommendations:
l The Department of Finance and the Central Bank of Ireland are leading on the improvement of data availability with a view to publishing key metrics towards the end of the second quarter. These publications will continue until we establish the National Claims Information Database next year. The Department of Finance is also in the process of implementing the Review of the Motor Insurance Compensation Framework recommendations and transposing the EU Insurance Distribution Directive. As part of these exercises, there is considerable ongoing consultation with relevant stakeholders. Also, the Central Bank will begin consultations this year on requiring insurers to provide additional information on the breakdown of premiums, rationales for increases and extending the renewal notification timeframe by five working days.
l In January, the Personal Injuries Commission was established and former President of the High Court, Justice Nicholas Kearns has been appointed as Chair. The Commission will investigate options from other jurisdictions to augment both the current system and the method for determining award levels in relation to personal injuries. The Department of Jobs, Enterprise and Innovation, in conjunction with the Personal Injuries Assessment Board (PIAB) and the Department of Justice, will also continue to oversee a range of improvements to the PIAB process and the Book of Quantum. These will include improving engagement with the PIAB process and introducing more granularity into the Book of Quantum, together with its more frequent publication.
l The Department of Justice and Equality is leading on the establishment of a fully functioning integrated insurance fraud database for industry to detect patterns of fraud and a sub-group is overseeing this process. In addition, a range of reviews has commenced into important issues such as the effects of legal and other fees on personal injury awards and the impact of the court jurisdictional limits as they evolve.
l The Department of Transport, Tourism and Sport, meanwhile, is working to establish a database to identify uninsured drivers. It is expected that the first phase of this project will be operational in Quarter 3 and there has been engagement over the last number of months between the Motor Insurers’ Bureau of Ireland (MIBI) and the Department on this matter.
Our priority actions are clear, but I would expect that the Report’s 71 action points will all be implemented by the end of 2018, with 45 due for completion by the end of this year. So a lot of changes are coming and are coming quickly. We’ve a big piece of work to do.
Do you anticipate opposition to these reforms or have you cross-party support?
The Report of the Cost of Insurance Working Group recognises the need for cross-party support for the implementation in particular of the legislative elements of its report such as, for instance, the national claims information database. I was always clear that we could only achieve reform quickly if all stakeholders, including legislators, were willing to work together. The Oireachtas Finance Committee has been very helpful in this regard.
Ministers are pushing to ensure that actions relevant to their responsibilities in this Report are being prioritised. There is no single policy or legislative ‘silver bullet’ to immediately stem or reverse premium price increases. It will take time to implement the measures identified. So we have to keep on driving this politically. I have said previously and will say again that I believe that cooperation and commitment between all bodies and individuals with a stake in a stable and accessible insurance market can deliver fairer premiums for consumers.
Can you comment on your Department’s interest in the transposition of the IDD into Irish Law? Will your Department transpose it verbatim or elaborate on it? Will there be a consultation process?
A consultation was launched on Wednesday, 29 March inviting members of the public to submit their views on the discretions available in IDD. It is intended that the consultation period will remain open until the end of April. The responses received by the Department will be considered and may have an influence on how the Directive will be transposed. The Directive must be transposed by 23 February 2018 and the Department intends to meet this transposition deadline.
“An essential point that is being lost in the fog of a media-framed war for Brexit spoils is that the relocation of operations out of the City of London is ‘necessary’ to ensure the integrity and business continuity of the European financial system. Ireland has a thriving and expanding financial services sector, which goes without saying. The size of our financial sector is twice the European average. In the two years since the launch of the government’s IFS2020 Strategy in 2015 we have seen approximately 4000 net new high-value jobs added to the sector”
As Brokers are at the coal-face and the primary distribution channel for insurance products within our industry, can you comment on the Setanta Insurance collapse and solution for claimants?
Commercial failures of insurers do arise from time to time as we have witnessed in Ireland in the past. The Setanta Insurance collapse has raised a lot of issues about why the company was allowed to get to the stage where it became so badly insolvent.
The impact on third party claimants in particular has been significant, as a lot of people have been forced to wait a long time because of the ongoing court case, the purpose of which is to determine whether it is the ICF or MIBI which is ultimately responsible for meeting the outstanding claims. At this stage, I have no date as to when the Supreme Court will make this decision.
I am aware that there is a view that the Government should provide the necessary resources from the ICF to ensure that the liquidator can address outstanding claims without further delay. The difficulty with this, however, is the fact that the High Court and Court of Appeal have found that the ICF is not liable for these claims. Instead, they have found MIBI liable. So, compensating policyholders from the ICF would directly conflict with the decision of the Courts, and could be interpreted as undermining their authority.
I am hopeful that once the Supreme Court judgment is issued, it should be possible for claims to be paid out either through MIBI or the ICF within a reasonable period of time. In the meantime, the Insurance Compensation legislation is being amended to address the Setanta and Enterprise type scenario in case it arises again in the future (see below for more details).
We understand that the Cost of Insurance Working Group is now examining issues around Public Liability and Employer Liability Insurance, can you tell us something about this?
Yes, having published the Report on the Cost of Motor Insurance in January, the Working Group has now moved into its second phase where it is reviewing the cost of Employer Liability (EL) Insurance and Public Liability (PL) Insurance, as well as a few additional pieces that have arisen, including a more in depth look at the role of brokers.
During this phase the Working Group have held extensive consultations with a range of stakeholders including IBEC, ISME, the Vintners’ Federation of Ireland (VFI), the Licensed Vintners’ Association (LVA), the Retail Grocery Dairy & Allied Trades Association (RGDATA), the Hotels Federation of Ireland and Chambers Ireland. Further consultations are also planned and submissions have been invited from interested parties.
The Working Group intend to build on previous work done as it relates to PL and EL claims in examining:
l Personal Injury data and information
l Effects of legal costs and litigation processes on insurance costs
l Current claims compensation arrangements and cost of claims
l Impact of unlawful activity on insurance sector
The Working Group is also considering the impact of the cost of insurance on the competitiveness of particular business sectors, the impact of health and safety issues on the cost of insurance, and other market issues. It is expected that this second phase will be completed sometime in Q3.
You mentioned above about the review of the motor insurance framework legislation, what is the status of this at the moment?
The failure of Setanta Insurance in 2014 and the uncertainty that has followed over the compensation arrangements for claimants highlighted weaknesses with the current insurance compensation framework in Ireland. In response, the Review of the Framework for Motor Insurance Compensation in Ireland was published in June 2016 and sets out an assessment of the current framework and makes recommendations to provide certainty regarding the future regime. Since the publication of the report, work has commenced on the implementation of its recommendations, including the drafting of amendments to the Insurance Acts. The necessary consultations with various stakeholders, including industry are ongoing. It is expected that a legislative proposal will be brought to Government for approval in the coming months. I’m quite keen to move forward with this.
Some of the key recommendations contained in the report are:
l That coverage of the Insurance Compensation Fund will be extended to include third party motor insurance claims in the event of a liquidation of an insurer. The level of cover from the Insurance Compensation Fund for third party motor insurance claims will be increased from 65% to 100% in line with that currently provided by the Motor Insurers’ Bureau of Ireland.
l The increased coverage of the Insurance Compensation Fund will be funded by a direct contribution to the Insurance Compensation Fund from the motor insurance industry. While the Review indicated that this would come via the Motor Insurers’ Bureau of Ireland, to the value of 35% of the third party motor insurance claims, further discussions are ongoing with industry about options for alternative funding arrangements which would provide greater predictability about their financial exposure.
