The worldwide trend for the motor car insurance premiums is a significant decrease in the charged premiums. On the contrary, Ireland has set itself apart, and the motor insurance premiums are increasing at an alarming rate. The Central Statistics Office indicates that the insurance premiums has gone up by more than 30%. This has affected Ireland's drivers to the point of them marching on the streets aiming at petitioning the government to regulate the insurance companies. But what is causing the sharp rise in the cost of car insurance? Let's dissect the problem and find out the reasons.
Increased Awards
Ireland is paying out excessively high awards as compensation for personal injury and other damages related to motor cars. The increased cost is passed to the premium payers thus increasing the rate. There are particularly high awards dished out to whiplash injuries. The injuries are rampant, and when taken to court, they are awarded as high as €15000. This has significantly increased the premium costs.
Competition among Insurance firms
Competition among rival firms led to a reduction of premiums to levels that are not sustainable. In 1990, Quinn insurance company made a dramatic entry into the Ireland motor insurance industry. It drastically reduced the premium levels and every driver in Ireland were buying their insurance policy. On realising this, the competitor insurance firms were also forced to lower their premiums. The low premiums are unable to cater for the ever-rising claims and the resultant awards. As a result, the companies are rushing to get back to realising profits after operating at minimal profits for quite some time now. The urge to increase the profit is squarely placed on the consumers leading to the incredible increase in premiums.
Rise in Legal Costs
The cases that are filed in the courts are often inflated. The lawyers, sometimes, state unrealistically high values as claims. In the Court of Law, they offer a competitive argument until the exaggerated claims are awarded. The high compensation rates were for a long time not proportional to the premiums charged. This has resulted in the insurance companies getting constrained in their budgets. When they were pressed beyond what they could handle, they increased the insurance rates. The judges have, however, been adamant that they are not to blame for the mishap.
Collapse of Setanta Insurance Firm
Setanta Insurance started charging very low premiums that were not sustainable. When it became overwhelming, the firm was forced to stop its operations in Ireland. The firm collapsed with approximately € 90 million in debts and awards arrears. The Ireland High Court and the Supreme Court ruled that the Motor Insurers' Bureau should take up the € 90 million. The ruling saw the premium payers affected since the bureau had to distribute the cost among them. It increased the rates to a tune of € 50 for every individual.
Fraud
There has been a worrying trend in Ireland where people are conspiring to stage-manage accidents to receive competitive rewards. These fraudulent activities have largely increased the total amount awarded by insurance companies as compensation. To cover up for the increased awards, the insurance companies increases the premium levels.
Powerless Injuries Board
The government formed an injuries board to quicken the process of compensation and reduce the backlog of cases in the courts. The board was mandated with handling disputes arising from the claims and make awards where necessary. The board was meant to reduce the cases undergoing the lengthy court process thus significantly reducing the legal charges. The legal charges and the exaggerated awards by the judge have contributed to the current situation, reducing the court hearings would, therefore, have a positive impact on the premium rates.
This board has not performed as expected. This is primarily due to too high numbers of whiplash cases without medical examination. This forces the cases to be referred to the court law. The whiplash injuries fetch between € 10000 and € 20000, more than triple compared to the UK. More powers should be granted to the board to deal with many more cases.
Weak Enforcement of Road Traffic Laws
The traffic laws are poorly implemented in Ireland. There has been a rise in the number of accidents in the recent years. This has resulted in the payment of claims too soon before the car owner pays any significant premiums. Additionally, the claims awarded are too high. The frequency and high awards of the claims have in turn led to increasing in premiums. The traffic laws should be implemented to the letter.
The high premium rates in Ireland are a reason for any driver to get worried. Is there any value of owning a car in Ireland? The question has been shared among the residents, but the question, how long will the rates be this high? The Finance Minister through his spokesman, Michael McGrath, has explained that the premium rates are going doing. How true is this? Only time will tell.
