The Word on the Week

Motor Insurance

The recurring scandal of soaring motor premiums reached its head this week when a Representative of the Industry received a “roasting” on the Prime Time T V programme. He had no convincing answers in the face of a statistically well prepared mature PhD student who was turned loose on him!
This topic has been in the news as recurring price hikes have increase renewal premiums by considerable percentages over the previous annual premium causing an outcry in the media. There is word of a Government commission to look into the escalating personal injury awards that are a major contributor to these hikes and, in particular, cap whiplash awards at a level comparable with that of the U.K.
There have been allegations of price fixing as the market has moved in unison in the face of heavy losses. Companies’ statistics do not vary very much and their attempts at valuing the cost of future claims (a necessary function as most contracts run for 12 months) also tend to work out along similar lines. The public want to see the figures in the interests of ‘transparency’ but these must remain confidential in a competitive market.
The industry has also to cope with accident and injury claims from uninsured drivers. This it does through a Bureau financed by a levy on companies operating in the Irish market. Recently, on the failure of an Insurance company, the courts ruled that the Bureau should pay for its unpaid claims. This is particularly galling as the failed company had distorted the market by price-cutting bringing all premiums down through intense competition to an uneconomic level. This has produced the current premium increases in an effort to build up the reserves and produce a profit.
Because of the risk-taking nature of insurance the margin of solvency required by law is higher than that of other businesses. This requires the building of reserves to achieve the required margin and not to use these reserves to pay current claims. Failing to take this into account in the past has led to the bankruptcy of a number of Irish Insurance companies.
Greed lies at the heart of it all. From over inflated premium to the over stated or fraudulent claim. To combat these requires constant vigilance, both on the part of the Central Bank and the various insurance watchdogs.
Jesus said, “Be on your guard against all covetousness, for one’s life does not consist in the abundance of possessions” (St Luke Chapter 12 verse 15). That begs the question, what does our lives consist of? The answer may be found in St Paul’s advice to the Colossian Church. “Put to death therefore what is earthly in you: sexual immorality, impurity, passion, evil desire, and covetousness, which is idolatry” (chapter 3 verse 5). This can only be done by turning to and trusting in the living reigning