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Policy
Proposal of the Motor Insurance Justice Action Group (MIJAG)
Written by Mick Murphy and Lisa Maher (Dec 1999).
Young male drivers in Ireland typically pay over £2,000 for car insurance
regardless of driving experience or licence held. Those under 20 with
provisional or full driving licence will be quoted twice and three times
that amount which effectively bars them from driving. Some are paying
over £4,000 for car insurance but most simply cannot afford these premiums.
Many young drivers take out insurance policies in order to get an insurance
certificate, but fail to pay the premiums and drive un-insured. As a result
drivers under 24 years of age make up only 6% of those who drive regularly
compared with the European average of 14%. Young female drivers pay less
but all pay much more than twice the average car insurance premiums of
£480.
Woefully inadequate public transport.
Public
transport in the Greater Dublin area is very poor by European standards.
There is a very limited train system and a bus system, which keeps irregular
time due in the main to a general traffic problem. Journeys which involve
transfers are very difficult to make in a timely manner. The rest of the
country fares little better. A typical example of a transport problem
faced by young people is getting to work at Intel. The average age of
the workforce at this, the largest factory in Ireland, is 23. Most of
the 4200 people who work there live in and around Dublin. Bus or train
journeys to Leixlip from places like Tallaght or Clondalkin could take
up to two hours. Often the only practical way to get around is by car.
Young drivers a higher risk, but how much higher ??
The reason given for the extremely high premiums for young male drivers
is the high risks involved. However the data that is in the public domain
does not back this up. The Irish Insurance Federation Factfile 1998 makes
the following contradictory claim on page 27, "The cost of motor insurance
for young drivers is justified by their claims experience. In the period
from 1992 to 1996, the relative claims cost (a combination of frequency
and cost of claims) for non-comprehensive insurance was 97% higher for
policyholders aged between 17 and 24 than it was for the 36 to 40 age
group. For comprehensive insurance, it was 66% higher for the 17 to 24
age group than for the 36 to 40 group". It is possible to deduce from
these figures that young drivers taken as a group represent approximately
twice the average risk. Yet insurance quotes for this group are typically
three, four and sometimes up to ten and twelve times the average.
The National Roads Authority report on Young Driver Accidents 1997 says
in its first line "Young Male Car drivers (17-24) account for 10.8
per cent of all drivers killed". Young male car drivers account for
just less than 5% of all drivers. These two totally independent sources
yield almost identical statistical conclusions.
Safer driving is vital but is not the only answer.
Most of the agencies including the AA, SIMI, Irish Insurance federation,
Deloitte and Touch Consultants and Government officials say the only answer
to the high premiums for young drivers can be found in safer driving practices.
While no one can deny the need to improve road safety it would be wrong
to say it is the only answer to this problem. For instance in the Governments
"The Road to Safety" strategy document it shows that relative to the number
of miles being travelled and the numbers of cars on the roads, the numbers
being killed on the roads has been declining gradually over the past 20
years. In the last 10 years car figures have gone from 1million to 1.5
million while accident figures have remained much the same. So at a time
when road transport has been getting gradually safer car insurance premiums
for young drivers have being rising sharply.
Eight out of Nine companies would not give a quote.
A more obvious reason is where profit is the only motive then the service
will only be provided to profitable segments of the market. For example,
historically in this country it was not left to the market to provide
electricity to every home. If it was then many areas would still be in
the dark. Likewise if profit were the only motive for providing public
transport then many areas and estates would never see a Bus or Train.
In 1996 the Deloitte & Touche consultants presented a report to the Government
on insurance as a whole. In Table 4 of the appendix they showed that when
nine of the leading motor insurance providers were asked to quote third
party cover for a driver age 20 with no previous accident record and holding
a full driving licence, driving a two year old, 1100cc Ford Fiesta, they
got the following response. Eight of the Companies would not quote. Most
had age limits ranging up to 28 years of age. One quoted £2,029 for a
male driver and £1,469 for a female driver. However in the reports recommendations
they spoke only of the need to increase safety amongst young drivers.
These advisers to the business community failed to point out the obvious
flaw in the market where in pursuit of profit, unless they are compelled
to do otherwise companies ignore many segments of the market.
Discrimination Against the Young Driver.
On average young drivers pay £2,311 for car insurance. A seventeen year
old with a full licence will typically be quoted £3,800 for insurance.
Many young men under 25 with five years accident free driving still pay
over £2,000 for insurance. Many of these people work as drivers for a
living including Truck drivers. They have safe driving records but are
discriminated against because of their age. Health insurance in this country
is regulated with the "Community Rating" making sure that a healthy person
pays the same for health insurance regardless of age. Age discrimination
in the provision of motor insurance should not be allowed either.
Profiteering by Cherry Picking
MIJAG believes the main reason for excessively high insurance premiums
for young drivers is being caused by profiteering in the market. Companies
driven by the profit motive, only get involved in insuring drivers where
they can make an easy and steady profit and ignore the rest. In Ireland
where the profits margins on motor insurance are tight, it is even more
the case that companies cherry pick in the market. Only two of the seventeen
companies operating in the motor insurance business in Ireland will quote
young drivers. If young drivers have a claim often their premiums are
doubled as opposed to simply losing their no claims bonus. Young drivers
represent a small and difficult (issues with payment and loyalty were
mentioned as well as risk) section of this market and most companies choose
to ignore them all together. The few that do engage in this market do
it at rip-off prices.
Insurance Costs in Ireland are High
Overall cost of motor insurance is high in Ireland. There are some facts,
which should be mentioned to help explain this. According to the "Blue
Book" which is compiled on the Insurance Industry by the government each
year, of the £709.9 million collected in premiums in 1997 for all motor
insurance, £615.4 million was paid out in claims. Therefore high cost
of claims is the overwhelming factor resulting in high premiums. For instance,
although UK drivers lodge more claims, the average claim in 1994 was £1,068
there as opposed to £4,547 in Ireland. The main reason for this according
to the AA is that we have many more accidents that involve serious personal
injury than in the UK. There are some inconsistencies in the amounts awarded
for similar types of injuries. This is an issue , which the insurance
industry is taking up with the Government.
But the main conclusion to be drawn from these facts is that improving
safety is of paramount importance for all drivers and within that changing
driver habits is crucial. MIJAG has done research on several countries
including Canada, Denmark and Australia. The best comparisons can be made
with the North of Ireland, where motor insurance is a fraction of the
cost in the South for young drivers.
Regulation -:vs:- Nationalisation
When presented with the arguments made above many would say that the government
should regulate the industry to force all insurance companies to quote
young drivers. It would be argued that more competition would mean lower
premiums. If this were done it might have some affect. The arguments against
this approach are, first, it would not be easy to get this to happen.
The Insurance industry would challenge any attempts by the state to regulate
them. Cases would be taken to the courts and on into Europe. It would
be a long time coming and for limited if any benefits to young drivers.
A State Company to Insure Young drivers
MIJAG believes the issues of affordable motor insurance can only be solved
when the Government takes on to set up a company to insure young drivers.
The drivers should have an important say in how this company is run and
it may be necessary for good social reasons to subsidise this company.
Drivers who build up over time a record of offences for being dangerous
drivers should be charged more. One of the main policy proposals in "The
Road to Safety" report namely, to develop a penalty points system which
would trigger disqualification following repeated driving offences, should
be introduced also.
The
main Demands of a Campaign are :-
1. Implement in full "the road to safety" strategy as outlined by the
Government.
2. Discrimination on the basis of age in the provision of motor insurance
to be banned.
3. Insurance premium penalties to apply only after a proven safety related
driving offence has been committed.
4. Implement drivers education and a penalty points system, which would
trigger disqualification following repeated driving offences.
5. Insurance for young drivers to be provided by a non-profit-making State
company at average motor insurance costs.
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