• David Kieran

Pressure placed on insurers to absorb new government levy on motor policies

Pressure is being applied on insurers to absorb the latest levy on motor policies.

New legislation going though the Oireachtas will require insurers to create a bail-out fund to be based on a contribution, or levy, of 2pc of the value of gross written motor premiums.

The levy will be become third one on motor premiums, costing motorists €50 on a €750 motor policy.

But there were calls for motor insurers to absorb the new levy instead of passing it on.

The levy comes following the collapse of Malta-registered and regulated Setanta Insurance and is to cover the cost of future insurance company collapses.

The Insurance Compensation Fund, set to bailout bust insurers, has been overwhelmed by the cost of the Quinn Insurance collapse.

The Department of Finance insisted the new 2pc levy is an industry contribution and should not necessarily be a levy on policyholders' premiums.

But expectations are that the levy will be passed on.

Fianna Fáil finance spokesman Michael McGrath called on insurance companies to pay the new 2pc industry contribution out of their own resources and not impose it on motorists.

"Insurers have no excuse for passing this on. They have known about it for two years. It should not be passed on to policyholders," he told the 'Today With Sean O'Rourke' programme on RTÉ Radio.

Junior Minister Michael D'Arcy has said the Setanta levy "is required" because as "long as there have been insurance companies there have been insurance company failures".

However, he admitted he did not know if insurance companies would pass the cost on to customers but said it was a chance for companies to be competitive adding the levy would "not break them".

Mr D'Arcy also warned that prices are never going to be reduced to the low levels seen a few years ago.

Insurance costs hit a peak in summer 2016 when premiums were up to 70pc higher than they were during a price war which saw costs plummet. In the interim costs have been reduced by 20pc, but the minister said they will never be reduced by 70pc. The price war led to insurance becoming "too cheap" and led to companies leaving the jurisdiction and no new entrants coming in.

Peter Boland of the Alliance for Insurance Reform said it was inevitable the levy would end up being paid by motorists.

If it is passed on it will bring to 7pc the total levies applied to motor policies.

Drivers already pay a 3pc levy which was originally put in place to rescue PMPA, but has since mutated into a stamp duty tax.

In addition, 2pc is paid into the Insurance Compensation Fund, but most of this is being eaten up from the cost of the Quinn Insurance collapse.

Mr Boland of the insurance reform lobby group said every problem in the insurance sector ends up being a problem for policyholders.

"The Government is essentially levying the consumer. There is no oversight of the insurance industry in this country.

"And this cycle of crises will continue until there is full and proper data oversight of the insurance industry."

Insurance Ireland, the lobby group for the industry, said it could not comment on whether the new levy would be absorbed by the industry.

"Insurance Ireland has no role in respect of the commercial decisions of any insurance company in the market."



GET IN TOUCH

We'd love to hear from you!

1850-677-678

  • White Facebook Icon

Find us on Facebook

  • Facebook Basic
  • Twitter Basic

© 2023 by Blue Sky Financial. 

Mongelia Ltd t/a Blue Sky Mortgages, TMC Life & Pensions, Blue Sky General Insurance Brokers, TMC General Brokers, Blue Sky Financial are regulated by the Central Bank of Ireland.

TERMS

Developed By Marketing For Me