Government Introduces Transparency Code for Insurance Industry

The Government is set to introduce a “transparency code” aimed at ensuring insurance companies pass on the benefits of recent reforms to consumers, particularly through lower motor insurance premiums. This initiative follows a notable increase in motor insurance costs over the past two years, prompting the Government to take action as part of the newly unveiled Action Plan for Insurance Reform.

A feasibility study will be conducted to explore how data on insurance costs and premiums, collected by the Central Bank, can illuminate whether insurers are indeed transferring the advantages gained from reforms to their customers. The focus will be on enhancing transparency in the insurance sector, which is crucial given the ongoing rise in premiums.

The insurance industry has seen significant improvements due to the strengthening of the Injuries Resolution Board, modifications to duty of care legislation, and the establishment of a dedicated garda anti-fraud unit. Recently, the Cabinet Sub-Committee on Insurance Reform, led by Tánaiste Simon Harris, rejected a proposal from the Judicial Council to increase judicial award guidelines by 17%, a decision that provides further support to the insurance sector.

The Action Plan, which will span until 2029, outlines a series of actions for various departments and organizations, including the Central Bank. It will concentrate on six pivotal themes: transparency and affordability, competitiveness and availability, fraud, innovation and skills, climate protection, and legal reform.

One of the key objectives is to revise the powers of the Injuries Resolution Board, aiming to make it the primary avenue for determining injury awards. The plan also proposes to change the award of legal fees, shifting from the more expensive court system to those determined by the board. Currently, legal fees for cases settled through the Injuries Resolution Board average just €597, while litigated cases incur average costs of €24,786.

Benchmarking Irish awards against similar payouts in the UK and across Europe is another crucial task outlined in the action plan. Addressing legal costs remains a priority, with considerations for developing clear guidelines and scales of fees that lawyers can charge for civil litigation, particularly in personal injury cases.

The Government is also examining how insurance companies have enforced a ban on “price walking,” a practice that penalizes loyal customers. Additionally, there are plans to improve transparency for consumers regarding how their premiums are structured. Streamlining the authorization process for new market entrants and imposing stricter penalties for fraudulent activities are also included in the agenda.

This comprehensive approach reflects the Government’s commitment to reforming the insurance industry, ensuring that consumers benefit from lower premiums while maintaining a fair and competitive market. As these initiatives roll out, the Government aims to foster an environment of trust and transparency within the insurance sector.